How to Start Dropshipping on Amazon in 2024-The Ultimate Guide

Did you know that independent sellers contribute to over 60% of sales in the Amazon store according to Amazon selling stat?

This data is remarkable. It shows the big impact of small and medium-sized businesses on Amazon's success. It also highlights the huge potential for growth and profitability on the platform. This is especially true for those doing dropshipping. In 2022, sellers based in the US, including many dropshippers, sold over 4.1 billion items worldwide. We can see there was a vast reach and scalability of dropshipping on Amazon. Also, these sellers average over $230,000 in sales each. Dropshipping still offers a great opportunity. Entrepreneurs can thrive on Amazon's success.

In this blog, we'll walk you through everything you need to know to start your dropshipping venture on Amazon successfully.

Table of content:

• What is Dropshipping?
• Pros and Cons of Dropshipping
• Eligibility of Dropshipping on Amazon
• How do you Start your Dropshipping in 4 steps?
• Can I Dropship Any Products on Amazon?
• How much Money can I make with it?
• How much does it Cost to Drop Ship on Amazon?
• How do I Find Reliable Dropshipping  Suppliers?
• Amazon FBA vs. Dropshipping?

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What is dropshipping?

Dropshipping on Amazon is when sellers sell products on Amazon's website without keeping them in stock. Instead, when someone buys something, the seller buys it from another company who then sends it directly to the buyer. So, the seller doesn't have to store or ship the products themselves. It's like being a middleman between the buyer and the supplier.

So imagine this: you create a virtual storefront on Amazon, stocked with all sorts of amazing products. A customer spots something they love and places an order. Here's the magic part: you don't actually have those products sitting in a warehouse. Instead, you forward the order to a supplier who then ship it directly to the customer. You never have to touch the product itself!

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Pros and Cons of Dropshipping on Amazon

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Pros of Dropshipping on Amazon

• Minimal Startup Cost: Dropshipping doesn't require a lot of money upfront for inventory. It's great for beginners who want to start small and see how things go.‍
• Offer more Products: Traditional stores are limited by their physical stores. You can cater to many different interests and preferences.‍
• Flexibility:  You can run your business from anywhere with just a computer and internet. Whether you're at home or on vacation, you can handle orders and interact with customers

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Cons of Dropshipping on Amazon

• Less Profit Margins: Since you're not buying items in bulk, your profit margins might be narrower compared to those who buy wholesale. This means you have to be smart about pricing to make sure you're still making a decent profit.
• Limited Quality and Shipping Control: You're depending on your suppliers to deliver top-notch products and handle shipping efficiently. If they slip up, it could reflect poorly on your business. That's why it's crucial to choose reliable suppliers.
• Tough competition: Dropshipping is a popular choice, so you'll face competition from other sellers offering similar products. To stand out, you'll need top-notch customer service, competitive pricing, and savvy marketing strategies to attract and keep customer

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Eligibility of Dropshipping on Amazon

Dropshipping on Amazon can be a great way to enter ecommerce. But, to start your business, you must understand their rules. Here's a breakdown of key Amazon drop shipping policy:

• Be the Seller of Record: This is a big one. Amazon requires you to be the sole seller responsible for the products you list. This means your business information must be on invoices, packing slips, and any external packaging. Remember to remove all traces of other sellers or suppliers before shipping.
• Returns Reality Check: You're on the hook for processing customer returns. Be prepared to handle this aspect efficiently to maintain a good seller reputation.

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Is Dropshipping Legal on eBay and Amazon?

Some people may want to drop ship their products from eBay to Amazon. But is it legal to do it? Dropshipping is legal. But, dropshipping from one online marketplace to another (like eBay to Amazon) is usually not allowed. This is according to their terms of service.

For example, according to eBay policy, it bans listing an item on eBay. You can't then buy the item from another retailer or marketplace and have it shipped to your customer. So as Amazon, Your supplier needs to be a wholesaler or distributor who can ship directly to your customers.

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How do you Start your Dropshipping in 4 steps?

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Set Up Your Seller Account

To start selling on Amazon without keeping inventory, you first need to create a seller account. Then, you'll choose a selling plan, either the Individual or Professional plan. I'll explain these plans next.

You'll need to register on Amazon Seller Central using your email. Then, you'll fill in your name, email, and password. Next, you'll provide more detailed information about your business, such as your address and tax details.

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Product Search

Picking a niche market where you can make good profits is crucial for success on Amazon. With over 12 million products on Amazon, it can be tough to find the right one. One trick is to look for products with high demand but low competition.

Another way to find bestselling products on Amazon is by using software for product research. These tools help you find products in high-demand categories. They make it easier to sell in many niche markets and earn more.

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3 Product research tools for drop shipping

Here are some well-regarded tools you can use for product research in dropshipping:

1. Sell The Trend: This tool positions itself as an all-in-one dropshipping platform. It helps you find trending products with data from AliExpress, Amazon, and Shopify stores. It offers paid plans with additional features like market niche reports.
2. AliExpress Dropshipping Center: This free tool is a great option for finding reliable suppliers and high-performing products directly on their platform.
3. Niche Scraper: This is a paid SaaS tool that helps you discover winning products for your dropshipping store, regardless of your platforms (Shopify, Amazon, etc.).

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Create Product Listings

Think of your product listings as your online salespeople. Use clear photos. Write informative descriptions that highlight features and benefits. Optimize them with relevant keywords. This will help customers find you. Here we provide you some tips to optimize your Amazon listings.

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Promote Your Products on Amazon

Once your products are listed, it's essential to promote them to increase visibility and sales. You can build up Amazon PPC strategies to reach potential customers through sponsored product ads, display ads, and other Amazon ad placements.

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Can I Dropship Any Products on Amazon?

While dropshipping on Amazon offers flexibility, there are limitations on what you can sell and how much profit you can expect. Here's a breakdown of product restrictions, brand approval processes, and the factors that influence your earning potential.

• Gated Categories: Certain categories like jewelry, collectibles, and sports memorabilia require approval from Amazon before you can list products. This often involves providing invoices or authorization letters from the brand or manufacturer.
• Health & Beauty Products: Safety is paramount here. You'll need approval from the brand and proof of proper licensing to sell these items.
• Restricted Products: Some products, like hazardous materials or weapons, are simply off-limits on Amazon.

Navigating Brand Approval:

• Go Straight to the Source: Contact the brand directly to inquire about their dropshipping policies and any specific requirements they have for becoming an authorized seller.
• Distributor Verification: Some brands only allow authorized distributors to sell their products. Ensure your supplier has a legitimate relationship with the brand you want to dropship.

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How much money can I make with Amazon dropshipping?

On average, dropshipping businesses can expect profit margins to fall between 15% and 20% according to BlueCart data. But overall your profitability depends on following several factors:

• Product Selection: Choose high-demand products with healthy profit margins. Avoid overly saturated niches where competition drives prices down.
• Pricing Strategy: Find the sweet spot. Be competitive and still make a decent profit after deducting Amazon seller fees. These fees include fulfillment, referral, and closing fees.
• Supplier Costs: The price you pay your supplier directly affects your profit margin. Negotiate the best possible price based on the volume you plan to sell.

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How much does it Cost to Drop Ship on Amazon?

It's not quite as straightforward as with other platforms. There are specific fees to consider. Knowing Amazon's standard selling fees is crucial for smart business decisions.

Here are the costs you need to consider:

• Amazon Professional Seller Account: There are two selling plans for sellers: individual plan and professional plan. If you are going to sell more than 40 items, we suggest you take the professional account. It comes with a monthly subscription fee of $39.99.
• Referral Fees: Amazon takes a commission on every sale you make. This fee varies depending on the product category, typically ranging from 8% to 15%.
• FBA Fees: They are not mandatory for dropshipping. But, using FBA can streamline your fulfillment. However, FBA comes with storage and fulfillment fees that can add up. Normally, according to Marketplace pulse, Amazon sellers need to pay 20-35% in Fulfillment by Amazon fees. Also, use tools like FBA fee calculators. They estimate your profit margins after factoring in Amazon fees. This can help you choose products with better earning potential.

• Other Selling Fees: You might face extra costs, such as closing fees and high-volume fees. These depend on your products and how you fulfill orders.

More specific information you could check out on Amazon selling fees guideline.

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How do I find reliable dropshipping suppliers?

You must make sure the suppliers you choose offer high-quality products. They must also have reliable delivery and excellent customer service. When looking for suppliers, focus on building long-term partnerships with them. Don't just look at prices. Here we compare some most common supplier platforms that you can drop ship.

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Zendrop:

Zendrop is a newer player in dropshipping. But, it has gained popularity for its focus on providing a seamless experience for dropshippers.

Pros:

Zendrop offers US-based warehouses and suppliers. They can greatly shorten delivery times for your customers if you are US sellers.

Cons:

While Zendrop offers a variety of products, the selection may not be as vast as some other platforms. Zendrop offers a curated selection of products. They are mainly in the fashion, beauty, and lifestyle niches.

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Wholesale2b

Wholesale2b offers many plans. Each is tailored to a different e-commerce platform, such as eBay, Amazon, and Shopify. Wholesale2b offers retailers a wide range of products in different categories. It also helps them automate tasks like managing inventory and processing orders. Additionally, Wholesale2b provides tools for making custom online stores. It also integrates with many third-party platforms.

Pros:

Wholesale2b offers many plans tailored to different platforms. These include eBay, Amazon, Shopify, etc. They let sellers choose the one that best fits their needs and budget. For those who haven't set up an online store yet, Wholesale2b offers a Dropship Website plan. They handle building the website and adding products from chosen suppliers.

Cons:

Wholesale2b offers customer support mainly through live chat and ticket requests. But, this support might not be available 24/7. It will be better if it offers more support channels. These could include phone numbers or email. They would enhance the customer service.

Also, according to their supplier policies, you may have to cover a 20% restocking fee if customers return undamaged items for any reason.

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Inventory Source:

Inventory Source also integrates with many e-commerce platforms. This allows businesses to sync their inventory across many sales channels.

Pros:

‍Inventory Source has a wide network of suppliers that cover various product categories. It offers you plenty of options for dropshipping. The platform provides automation tools for inventory management, order processing, and other tasks. You can automate inventory and orders. You can also set up TurnKey and Shopify-driven personal storefronts. You can choose which services to apply.

Cons:

Inventory Source offers automation tools. But, these tools may come with extra fees. These fees can raise sellers' costs. It offers you a free directory of Dropshippers, suppliers, and US wholesale distributors. But, if you buy products from multiple suppliers or sell them on multiple platforms, you'll need to pay extra fees.

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Alibaba

Alibaba.com focuses on B2B transactions. But, it also supports dropshipping between suppliers and retailers.

Pros:

Alibaba provides access to a vast network of suppliers and manufacturers. They offer sellers a wide range of products to choose from. Some suppliers on Alibaba offer customization options. Sellers can use them to tailor products to meet specific customer needs or preferences.

Cons:

Alibaba is similar to AliExpress. But, its delivery times can be long, especially for international shipments. This may impact customer satisfaction. Many suppliers on Alibaba require minimum order quantities, which can be high and may require a significant upfront investment from sellers.

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AliExpress

AliExpress, similar to Alibaba, is a popular online retail platform owned by Alibaba Group.

Pros:

AliExpress offers many products at low prices. This is appealing to sellers who want to maximize profits.

Cons:

One big drawback of AliExpress is its long delivery times. They can range from weeks to months. The time depends on the shipping method and destination. Many AliExpress sellers offer quality products and reliable service. But, some have inconsistent product quality or unreliable suppliers. This can impact the customer experience.

Ultimately, the best platform for you will depend on your specific needs and budget. Consider the factors mentioned above and try out different platforms to find the one that works best for you

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Amazon FBA vs. Dropshipping?

Amazon FBA streamlines e-commerce. It handles storage, packing, and shipping for sellers. This service grants access to Amazon's vast customer base and Prime benefits, enhancing visibility and trust. However, sellers must manage inventory and navigate associated fees for storage and fulfillment.

Dropshipping is different. It gets rid of the need for inventory management. Products are shipped from suppliers to customers upon purchase. Dropshipping offers low initial investment and flexibility. But, it comes with challenges. These include tighter profit margins. Sellers have limited control over product and shipping quality. They also face heightened market competition. The choice between FBA and dropshipping depends on business goals. It also depends on resources and risk and your control tolerance.

So you should choose dropshipping or FBA? It really depends on many factors. These include your product type, target market, inventory ability, and budget.

Generally, Dropshipping is a better option, if you are:

1. Sellers who want to manage order processing and customer service independently.
2. Sellers wants test market reactions or product viability but avoid large-scale inventory investment.
3. Beginners or startups since it requires less initial investment.

FBA is a better option, if you are:

1. Sellers want faster order processing and delivery. Amazon's logistics system is usually more efficient.
2. Sellers are unwilling to handle logistics and warehousing. Amazon takes care of all inventory management and order dispatch.
3. Sellers have stable sales and want to expand. They will do this by using Amazon's large customer base and Prime services.

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Amazon Dropshipping FAQs

Q: What are some benefits of dropshipping on Amazon?

A: There are several benefits: Low startup costs (no inventory!), wide product variety, and flexibility to run your business from anywhere.

Q: What products can't I dropship on Amazon?

A: There are restricted categories like jewelry, health & beauty products, and hazardous materials that require approval or are simply off-limits. Always check Amazon's guidelines for specific restrictions.

Q: How do I find reliable dropshipping suppliers for Amazon?

A: Utilize dropshipping platforms or wholesale marketplaces. Research supplier reputation, compliance with Amazon's rules, and their ability to integrate with your Amazon store for smooth order fulfillment.

Q: How much money can I make with Amazon dropshipping?

A: There's no guaranteed income, but it depends on your product selection, pricing strategy, and supplier costs. Dropshipping often comes with lower profit margins, but the upside is the low barrier to entry.