Amazon Dropshipping: The Ultimate Guide To Start and Scale Your Business

When it comes to ecommerce, it’s impossible to ignore the power of Amazon and its unparalleled reach, customer base, and global influence. No wonder the company has become the world’s largest online marketplace and go-to platform for entrepreneurs seeking to make their mark on the world of online retail.

Does operating an ecommerce business with minimal upfront investment, streamlined inventory management, and the potential for significant profits sound interesting? Then Amazon dropshipping might be the business model you’ve been looking for.

In this article, we’ll go on an exploratory journey into the world of Amazon dropshipping to reveal its intricacies, strategies, and secrets, providing you with the insights and knowledge you need to thrive in this competitive marketplace.

Whether you’re a seasoned ecommerce veteran or just starting out on your entrepreneurial path, this guide will equip you with the tools to leverage Amazon dropshipping to your advantage.

What is Amazon dropshipping?

Amazon dropshipping is the process of selling products on Amazon using the dropshipping business model, without storing inventory. All you need to do is partner with dropshipping suppliers who’ll fulfill the orders you get through Amazon directly to your customers. 

This means you won’t need to handle or buy the products in advance. You’ll only manage the listings, pricing, marketing, and customer service, leveraging Amazon’s vast customer base and logistics while minimizing upfront costs.

Source: Amazon

Is dropshipping allowed on Amazon?

Yes, dropshipping is allowed on Amazon. You just need to pay attention to the specific guidelines and policies that include certain criteria like:

• Being the seller of record for your products on Amazon, meaning you’re responsible for processing customer returns and any possible issues related to the order

• Using suppliers you have a direct relationship with, and that don’t advertise their products on Amazon

• Representing the items accurately in your product listings (and not creating duplicate listings for existing products)

• Maintaining product availability and shipping information

• Shipping orders in a timely manner, and providing tracking information

Note: Amazon’s policies and guidelines can be updated from time to time, so it’s essential to review them as well as the terms of service available on their official website or Seller Central portal.

Check Amazon’s Dropshipping Policy page for details.

Is Amazon dropshipping profitable?

According to Amazon FBA Statistics, 36% of Amazon sellers earn $5,000 per month, and a whopping 76% of Amazon sellers are profitable (63% of them within the first year). But while it’s true that the Amazon dropshipping business model offers the advantages of low upfront costs and reduced inventory management, there are several factors that can affect the profitability of your Amazon dropshipping business, like product selection, pricing strategy, relationship with suppliers, and others.

But before going deeper into that, let’s assess Amazon dropshipping pros and cons in order to check if it’s really the best option for your ecommerce business. Then, we’ll see how to do it efficiently.

Valuable read: How to Sell T-Shirts on Amazon: From $0 to $1,000 a Month

Amazon dropshipping pros

Everything in life has a bright side and a not-so-shiny side. We prefer to look at the glass half full, so let’s kick off this section on the advantages and disadvantages of Amazon dropshipping by highlighting the positive aspects of it.

No inventory

Dropshipping is a business model that enables you to sell products online without the need to maintain your own inventory. A designated dropshipping supplier takes care of the inventory, as well as the packing and shipping processes.

The advantage of not having to purchase and manage inventory minimizes storage costs, making it an ideal choice for budget-conscious entrepreneurs brimming with innovative ideas but constrained by limited financial resources and experience.

Low risk

Because it requires no inventory and minimal upfront investment, dropshipping stands out as one of the safest business models out there. Amazon dropshipping offers the same advantages as the standard dropshipping model, enabling you to sidestep issues like unsold products, while giving you the opportunity to learn from your errors without substantial financial losses. It also lets you harness their vast customer network and logistical services, adding an extra layer of support to your business.

Flexibility

When you choose dropshipping as your business model, you get the chance to test different products without buying inventory in advance or in bulk. All you need is a dropshipping supplier and pictures of your products to compose your Amazon listing. (And with a provider like Printful you can create amazing product photos with our Mockup Generator). This gives you the freedom to launch seasonal items and limited edition pieces as well as create marketing opportunities according to current trends and events.

Scalability

Another advantage of standard dropshipping that also applies to Amazon dropshipping is the fact that you can expand and scale your business whenever the opportunity arises. There’s no need to limit your ambitions.

Whether you’re looking to introduce new product lines, explore different niches, or expand into additional markets, Amazon provides the tools and resources to help you scale your dropshipping business with relative ease.

Wide customer base

This is where Amazon dropshipping starts to differ from standard dropshipping. Amazon’s extensive reach—over 2 billion monthly visitors—coupled with its unwavering reputation in the market, opens the door to enhanced visibility and additional sales opportunities for your online store.

This presents a significant advantage, as selling products on your own website would entail investing in substantial marketing efforts like advertising to attract potential customers. Plus, you’d need to invest time, effort, and money into the development of a robust SEO strategy to compete in a crowded online market.

Easy to set up

The process of creating an Amazon seller account and listing products is relatively intuitive and straightforward. And for extra motivation, Amazon offers over $50K in potential benefits for new sellers. What incentives are offered? Check out the video below.

Amazon Fulfillment Services

As an Amazon seller, you can take advantage of the Fulfillment by Amazon (FBA) services to use Amazon’s logistics network for your business. Approximately 94% of Amazon sellers use Fulfilment by Amazon, which offers a global network of fulfillment centers and benefits like customers’ free, two-day shipping through Prime, customer service, and returns processing.

Freedom to use other fulfillment suppliers

Although Amazon has its own fulfillment service available for sellers, you still can use other providers that offer particular services or that better align with the specific requirements and goals of your business. For example, you can sell on Amazon with Printful, and connect to a huge variety of custom dropshipping products available through print-on-demand.

Source: Printful

Learn more about Branded dropshipping and how it can benefit your online store.

Amazon dropshipping cons

As promising as Amazon dropshipping may be, it comes with its own set of challenges. However, being well-prepared to confront these obstacles can make them more manageable. Here, we’ll outline key considerations and provide valuable tips on how to effectively address each of these issues.

Fierce competition

Amazon boasts a staggering 9.7 million global sellers, with 1.9 million of them active on the platform. That’s a lot of competition when you think about it. Standing out in such a competitive environment can be challenging, particularly in an oversaturated niche.

So if you decide to sell the same products as other sellers, chances are the customers will pick the store offering the lowest prices. In fact, price stands as the most decisive factor for Amazon shoppers (70%), followed by shipping cost (60%) and, lastly, product reviews (57%). To avoid falling into the pricing battleground, it’s wiser to offer unique items that your audience can’t find elsewhere.

Do some research to find the best dropshipping niches and dropshipping business ideas for you and your market, and invest in original products with private label dropshipping.

Limited control

When you make the choice to sell on a marketplace using the dropshipping business model, you have to be ready to give up part of the control over your business, since you won’t be in charge of product quality, shipping times, or even the interface of your online store.

Be mindful when you pick your dropshipping supplier, and make sure to order samples to check what your customers will get when they make a purchase from your store. Additionally, pay attention to Amazon’s terms and conditions, and be prepared to adapt your operations in accordance with them to ensure a smooth and compliant business experience.

Amazon’s fees

Amazon charges different fees that may vary according to your type of Amazon seller account and product category. These fees can have an impact on your business and make it less profitable if you’re not diligent in monitoring and managing them.

Source: Amazon

Get acquainted with Amazon fees and take them into consideration when you determine your pricing strategy. Having a proactive approach will help you avoid financial losses.

Policy restrictions

Due to its immense popularity, Amazon has slowly but surely implemented stringent policies and guidelines to maintain order and integrity on its platform. Breaching these policies can lead to notable consequences, including account suspension or even expulsion from the platform.

Take a look at Amazon Seller Central to learn everything you need to know about policy restrictions and more details related to Amazon Dropshipping.

Compliance and legal issues

As a dropshipper, you must be ready to deal with potential issues regarding intellectual property rights, tax obligations, and the complexities of import/export laws. This is especially true given Amazon’s wide reach, spanning millions of customers across over 180 countries.

Don’t hesitate to seek professional advice from an accountant or a lawyer to get the right information and prevent any legal complications.

Read more about it on: How to Start a Business in the US: Taxes and Legal Requirements Handbook

Marketplace volatility

In the world of ecommerce, the rules of the game can change at any moment. Amazon, like many other platforms, has rules and algorithms that are subject to periodic alterations. These modifications can significantly impact your business, obligating you to adapt or ultimately leave the platform.

Don’t put all your eggs in one basket. Amazon is a great sales channel, but it’s not the only one. Consider having a multichannel strategy and be willing to adjust your sails according to the wind.

Difficulties building a brand

Building a brand and customer loyalty isn’t an easy mission. And the challenge becomes harder when you’re dropshipping on Amazon because many customers don’t associate the stores there with the products they’re buying. Some actually think they’re buying from Amazon.

Work on your brand voice and visual identity in your communications to create a great customer experience. Embrace branded dropshipping and marketing strategies to build a strong brand and a loyal community. Get some ideas from the article: Marketing Your Online Store on a $50 Budget.

Get your Amazon dropshipping store up and running

Now that you know everything you’ll need to do to dropship on Amazon, put your plans into action and build a profitable ecommerce store on this great marketplace. Let’s recap the key takeaways you need to remember to minimize errors and increase your chances of ascending to the ranks of top-performing Amazon stores sooner rather than later.

Read more: 20 Best-Selling Items on Amazon

Product selection

Selling the right products is crucial. Dropshipping products with a high demand and little competition is the easiest way of getting sales.

Pricing strategy

Write down all your costs, including products, fees, shipping, and other expenses. Then, add your desired profit to the equation. Don’t forget to check other stores that sell the same items to stay competitive.

Read more about pricing in our article: How to Price Custom Shirts

Relationship with dropshipping suppliers

Finding a reliable third-party supplier and building a good relationship with them is essential. Shipping delays and poor product quality can result in negative reviews and affect the profitability of your online store.

Customer service

Building a positive reputation on Amazon depends on excellent customer service. Learn how to deal with bad reviews and how to turn a crisis into an opportunity to create customer loyalty. Also, handle returns with professionalism and address customer inquiries promptly.

Scaling

As your business becomes more mature, start thinking about scaling it to keep or increase your profitability. That may require more automation to handle a higher volume of orders efficiently. Be flexible and don’t be afraid to adjust your processes. Match Kicks’ success story is a great example of it.

In summary, the profitability of your Amazon dropshipping business will depend on your ability to build, adapt, and execute your business plan effectively. More importantly, learn and have fun along the way. Good luck!