Amazon Dropshipping – A Beginners Guide

You’ve heard about dropshipping and love the idea of not having to stock products anywhere?

It’s awesome that you don’t have to pay rent for storage space. Plus, you don’t have to take care of shipping. And, oh, yeah, you don’t have to worry about packing either. Others do all that for you. Yours is to find great products to sell, choose a platform to sell on, and focus on marketing your business.

Speaking of platforms, many dropshippers choose Amazon. Yes, you read that right… AMAZON.

While being the #1 e-commerce marketplace in the world, it’s also a great dropshipping platform. Didn’t know about that? Many people don’t because it’s not talked about it a lot. That’s why we are here to change that.

In this article, we talk about Amazon dropshipping. We discuss all the important things about dropshipping on this platform that a beginner should know of.

Let’s get started!

Dropshipping on Amazon – Is It Allowed?

Contrary to what many people think, dropshipping on Amazon is allowed. Although this marketplace is mostly used for classic e-commerce, dropshipping is also possible. The trick is that you have to follow several rules as to not get banned from the site including:

  • You must be the registered seller of the products in your store, not the original seller. This accounts for everything related to the product such as packaging, branding, and packing slips. It also accounts for the invoices and other information related to the products you sell.
  • You must remove everything that identifies the original seller of your products before shipping your orders. This includes the packaging, packing slips, invoices, and other items that contain the seller’s info.
  • You are responsible for managing returns – In case of damaged products during shipping or wrong products, you need to take care of accepting and processing the returns from your clients.
  • You have to follow the terms of the seller agreement between you and Amazon as well as the dropshipping policy.

Having said that, you can’t buy a product from a third-party Amazon seller and send it to your customers. Also, you must remove everything related to that seller and put your brand’s name on the product’s packaging, invoice, card, etc. If you fail to comply with these rules and Amazon’s dropshipping policy, you’ll be prohibited from selling on this platform.

How to Dropship on Amazon?

To start dropshipping on Amazon, first, you need to get approved for an Amazon seller account. From there, you start customizing your Amazon store according to your e-commerce model (in this case, dropshipping). This includes finding your niche, finding winning products that will sell and bring good profit, and finding the suppliers/third-party sellers you will purchase products from.

Amazon Dropshipping Step by Step

Whether you have some knowledge of dropshipping or are a total newbie, here are the steps you need to follow when setting up your business.

Step 1. Set Up an Amazon Seller Account

We’ve already mentioned briefly that, first, you need to set up an Amazon seller account to start selling. To do that, you need to apply for it by filling out all information required. You can do that HERE.

Before setting it up, you have to choose whether you want an individual or a professional account, In your case, you have to choose the professional account. After that, you need to fill in information like the name of your business, address, tax information, credit card information, identity, and similar.

Step 2. Get Approval for Your Product Category (if needed)

Some product categories, such as jewelry, fashion, and grocery need to be approved before being sold on Amazon. So, if your products fall under any of these categories, make sure you first get approval before setting your Amazon store.

You can find more information about which products you can sell on Amazon and which require approval HERE.

Step 3. Find Winning Products

Winning products in dropshipping are products that have a high demand but low competition. In other words, these products sell like crazy, still, there aren’t too many sellers selling them.

To find such products, dropshippers use product research tools like Jungle Scout, Helium 10, AMZ Scout. While you can filter products according to your predefined metrics, we suggest choosing products following these criteria:

  • Competition from “very low” to “low”
  • 100-300 unit sales per month
  • Niche score of 7+
  • An average monthly price of $20-$35

With these criteria, you will find plenty of products to choose from, yet products that are in high demand but have low competition.

Step 4. Find a Supplier on Aliexpress

Aliexpress is the number one choice for many sellers and dropshippers across the globe. It’s because it lists more than  2 million products at different prices, which are pretty low compared to other sites. The great choice of products allows you to find any product(s) you’d like to sell in your store and their suppliers.

To do that, you just need to type in the keywords (the name) of the product(s) you need and hit the Search button. You’ll get all keyword-related products in a second. Then, click on any product to get all the details, including the seller which will be your supplier.

When choosing between the same product, always go for the ones with the highest rating. Then, consider the price (the lower the better) and, if possible, free shipping to your country. It’s also a good idea to choose products for which the seller offers 60-day buyer protection. Moreover, keep in mind that the delivery time on Aliexpress is very slow, usually around 45 days. The good thing is that they offer fast 3-5 day shipping in the US.

Step 5. Create an Amazon Product Listing

Once you find the product(s) you want to sell in your store, it’s time to create a product listing. To do that, you need to go to your Seller Central account > Inventory > Add a product. On the “Add a Product” screen click “Create a new product listing”. First, you need to choose your product category and then fill out the information for the listing.

When setting the price for your product, consider Amazon’s fees. To make sure you charge enough to make a profit, you can use this cost calculator. As a rule of thumb, if you’re a professional seller, you should charge a referral fee of 8%-15%. On the other hand, if you’re an individual seller, you should add $1 plus because there’s a $1 fee per sale.

Once you’re all done, you can publish your product listing and start making sales.

Choosing Your Logistics Channel

There are 2 types of logistics channels available on Amazon: Amazon FBM and Amazon FBA.

Amazon FBM

Amazon FBM (Fulfillment by Merchant) is when you use your own logistics channel. This means you are in charge of handling the orders, packing, and shipping the products to the customers. If you choose this option, you have no service and shipping inventory fee on Amazon. While this does save you some money, you have to think about all associated metrics including:

  • Pre-fulfillment Cancel Rate
  • Order defect rate (ODR)
  • Late shipment rate (LSR)
  • Days Out of Stock (DOoS)

Does this sound too much?

Then, you can opt for Amazon FBA!

Amazon FBA

Amazon FBA (Fulfillment by Amazon) is a paid logistics channel.  This channel allows sellers to store their products in one of Amazon’s fulfillment centers. The staff in those centers handles picking, packing, and shipping products to the customers. Plus, it provides customer service for those products.

Amazon Costs

There are many fees associated with selling on Amazon. To succeed, you need to be aware of all of them and know the total cost for each product you sell.

The dropshipping fees vary between 10% and 15%. Therefore, you have to add over 15% margin to make some profit. Of course, the exact percentage depends on the product being sold.

Although Amazon fees are the most important for sellers, don’t forget to add the price of your seller’s plan. Namely, the Individual plan costs $0.99 per unit sold whereas the Professional plan costs $39.99 regardless of how many products you sell.

Find out more about Amazon fees HERE.

Amazon Dropshipping: Pros and Cons

Pros

  • #1 e-commerce marketplace in the world which allows you to connect with customers fast and easily.
  • It’s easy to start your Amazon business.
  • Low start-up costs since you don’t have to buy in advance the products you sell.
  • You can use Amazon SEO techniques to drive organic traffic.
  • You can use Amazon ads to drive traffic and increase sales.
  • You can choose Amazon FBA, which allows you to focus on marketing your business while Amazon handles all the hard work.
  • Verified Amazon dropshipping suppliers.
  • It’s easy to find products to dropship thanks to product research tools like Jungle Scout, AMZ Scout, Viral Launch, Helium 10, and many others.
  • Great chance of getting discovered by customers.
  • Fully automated business thanks to the apps and plugins available online.

Cons

  • You can’t buy products from an online retailer but directly from the manufacturer.
  • Most of the profit belongs to the seller. Also, a big percent of them is taken by Amazon’s fees. Hence, there’s not much profit left for you.
  • You can easily fail and even get suspended if some of your customers leave you a bad review (even if they are fake or paid by third-party retailers/competition) or have other problems.
  • You have to pre-order the products you sell so that you have some in your inventory.
  • Great competition, which makes it difficult for newbies to succeed.
  • Limited customization. There are no options to customize your Amazon store, branding, and marketing. Hence, you have no options to make your store stand out from the rest.
  • Slow delivery times – up to a few weeks because many of the suppliers and manufacturers are overseas.
  • No quality control from your side since the products are directly shipped from the manufacturer/supplier to the buyer.

5 Tips for Running a Successful Amazon Dropshipping Business

Running a dropshipping business on Amazon requires great effort, risk, and patience. While breaking through the platform and building a recognizable brand is hard, it’s not impossible. To prove that right, here are 5 tips to help you out have a great start and run a successful Amazon dropshipping business.

1. Optimize Your Product Listing

When creating your product listing make sure you optimize it so that it’s easy to discover and drive organic traffic. You can optimize your Amazon product listing easily even if you are a newbie. The best thing about it is that you don’t have to do it on your own but use Amazon SEO tools.

2. Promote Your Listing

Apart from optimizing your listing for Amazon and the web, you can also use Amazon PPC. With this program, you will create ads for your products that will rank your listing higher on Amazon’s search results page for the designated keywords.

Other means of marketing your listing are by using social media, email marketing, blogging, etc.

3. Develop Your Brand

Selling on Amazon means GREAT COMPETITION. While that makes standing out from the crows much more difficult, it’s still viable. The best way to do it is by building a brand. That means creating a store people will choose over other stores because of their accessibility, customer support, honesty, and other values important to customers.

4. Develop a Great Relationship with Your Customers

Speaking of building a brand, the best way to do it is by developing a great relationship with your customers. After all, the customer is always right. That’s why you should focus on your customers, assist them with anything they may need, and support them before, during, and after buying. With great customer support, you will get great product reviews. And, as you probably know, product reviews can make or break your Amazon business.

5. Sell Multiple Products

When starting, sellers usually focus on one or a few products. However, since dropshipping doest require pre-ordering of the products being sold, you can sell multiple products at once. In fact, you can sell as many products as you want. By selling numerous products, you will see which ones sell better and bring more profit and which aren’t worth selling. Then, you’ll be able to focus on the products that sell and replace the products that don’t sell with products similar to those that sell well.

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