Amazon dropshipping is a business model where you sell products on Amazon without keeping any inventory yourself. Instead, when a customer buys a product from your Amazon store, you purchase the item from a third-party supplier who then ships it directly to the customer. This way, you don’t need to handle or store any physical products yourself. The supplier takes care of all the warehousing and shipping, making it easier for you to focus on managing your Amazon store.
This model allows sellers to offer a wide variety of products without the financial burden of maintaining an inventory. It can be a good way to start a business with relatively low upfront costs. However, to be successful in Amazon dropshipping, you need to carefully select reliable suppliers and manage your listings effectively to compete with other sellers.
Pros and cons of Amazon dropshipping
Amazon dropshipping Pros
One major advantage of Amazon dropshipping is the access to Amazon’s vast customer base. Amazon’s marketplace provides immediate visibility to a large audience, which can help you reach potential buyers more easily than starting from scratch. Additionally, you don’t need to invest in warehousing or inventory, which reduces your initial startup costs.
Amazon dropshipping Cons
Despite its benefits, Amazon dropshipping has its drawbacks. One significant downside is the lack of control over product quality and shipping times, as these are managed by your suppliers. Additionally, you might struggle to build a strong brand presence because Amazon controls much of the customer interaction and your store's appearance.
How much does it cost to dropship on Amazon?
The cost of dropshipping on Amazon involves several fees that sellers should be aware of. Amazon charges a referral fee, which typically ranges from 8% to 15% of the product’s selling price. This fee varies depending on the category of the product. Additionally, Amazon charges a minimum fee of $0.30 per item sold. If you’re selling items with very low margins, these fees can significantly impact your profitability.
Besides referral fees, you will also need to choose a selling plan. Amazon offers an Individual plan at $0.99 per item sold and a Professional plan at $39.99 per month, regardless of the number of items sold. If you plan to scale your business or list a large number of products, the Professional plan might be more cost-effective in the long run.
Is Amazon dropshipping profitable?
Amazon dropshipping can be profitable, but it requires strategic planning and execution. The average profit margin for dropshipping businesses ranges between 10% and 30%. However, this margin can be affected by Amazon’s referral fees and competition in your niche. Successful dropshippers often focus on finding products with good margins and optimizing their listings to stand out from competitors.
Winning the Amazon Buy Box, which allows your product to be featured prominently on the product page, can help increase your sales. However, achieving this can be highly competitive and is not guaranteed. Profitability in dropshipping also depends on effective marketing and managing customer satisfaction.
How to start dropshipping on Amazon in 6 steps
- Step 1: Sign up for an Amazon seller account – To start dropshipping on Amazon, you need to create a seller account. Go to sellercentral.amazon.com and provide necessary details like your business email, credit card information, government ID, tax information, phone number, and a bank account for receiving payments. This account will be used to manage your product listings and sales.
- Step 2: Get approved in your product category (if necessary) – Some product categories require Amazon’s approval before you can start selling. Categories such as collectibles, music, and watches need special approval. Check if the products you want to sell fall under such categories and get the necessary permissions.
- Step 3: Log into your Shopify store – If you don’t have a Shopify store, start a free trial to manage your dropshipping business. Shopify integrates with Amazon and helps you connect your product listings with suppliers.
- Step 4: Connect your Amazon account to Shopify – Use an integration app from the Shopify App Store to link your Amazon account with Shopify. This integration helps automate order fulfillment and sync product inventory, streamlining your dropshipping process.
- Step 5: Create an Amazon product listing – You can link your existing Shopify listings to Amazon or create new listings directly on Amazon. Be aware that Amazon limits the number of new ASINs (Amazon Standard Identification Numbers) you can create each week until you establish a history of successful sales.
- Step 6: Promote your products on Amazon – Consider using Amazon’s Sponsored Product ads to increase visibility. Also, optimize your product listings with compelling titles and images. You can use social media to further promote your products outside of Amazon.
How to choose a dropshipping supplier
When selecting a dropshipping supplier, look for a provider with reliable shipping and quality products. Your supplier should offer timely delivery and maintain a high standard for the products they sell. Research suppliers to ensure they don’t have poor reviews or customer service issues that could affect your business.
It’s also important to choose a supplier with competitive pricing and low per-order fees. This can help you maintain healthy profit margins. Check if other successful dropshippers use the supplier and ensure they provide adequate support for your business needs.
Top Amazon dropshipping software
MerchantWords
This tool helps you analyze search volume and data for product keywords on Amazon. It starts at $35 per month and is useful for identifying popular keywords and optimizing your listings for better visibility.
Sellery
Sellery is a real-time repricing software that helps you adjust prices to win the Amazon Buy Box. You can use its trial version for free, with paid plans starting at 1% of your monthly sales, with a minimum fee of $50 per month.
FeedCheck
FeedCheck monitors customer reviews across Amazon and other sales channels. It helps you respond promptly to feedback and analyze competitors’ reviews. It starts at $129 per month.
Seller Tools
This software includes features like a keyword manager and PPC management tool. It helps automate various aspects of managing your Amazon dropshipping store and starts at $37 per month for the Chrome extension.
How to Dropship on Amazon Without Money
Starting Amazon dropshipping without spending money is possible:
- Choose the Individual Seller Plan: This plan costs per unit sold instead of a monthly fee.
- Pick Suppliers with No Upfront Costs: Most suppliers don’t require payment until after you make a sale.
- Create Your Own Content: Write product descriptions and take photos yourself.
- Use Organic Marketing: Promote your products on social media and optimize your listings for search engines.
Alternatives to Amazon Dropshipping
If Amazon dropshipping isn’t for you, consider these alternatives:
- Amazon Affiliate Marketing – Instead of dropshipping, you can join Amazon’s affiliate program, where you promote Amazon products on your website or social media. You earn a commission on sales made through your affiliate links. Commission rates range from 3% to 5%.
- Amazon FBA (Fulfillment by Amazon) – With FBA, you send your products to Amazon’s fulfillment centers. Amazon handles storage, packaging, and shipping. This can save time but comes with additional fees, including storage and fulfillment fees.
Running a dropshipping business with your online store
Running your own online store offers more control and customization than dropshipping on Amazon. With your store, you can design the shopping experience and manage your branding efforts. This can lead to stronger customer relationships and better long-term business growth.
Creating your own store means you avoid Amazon’s fees and have greater flexibility in marketing. However, you will need to drive traffic to your site through SEO, social media, and other marketing strategies.
Conclusion
Amazon dropshipping can be a great way to start an online business with minimal upfront costs. By understanding how Amazon dropshipping works, choosing the right suppliers, and using the right tools, you can build a successful dropshipping business on Amazon.