Amazon Dropshipping Guide: How To Run a Successful Business in 2021

Alex Stoykov

CEO & Head of Client Success

Alex Stoykov

CEO & Head of Client Success

Introduction

Amazon dropshipping is an appealing concept. You get to take advantage of Amazon’s traffic and marketing resources, but you never have to touch inventory.

But is dropshipping on Amazon that simple?

This Amazon dropshipping guide will walk you through everything you need to know to dropship on the marketplace successfully.

 

 

What Is Dropshipping?

Dropshipping allows you to sell goods to customers without developing products or maintaining inventory.

There are seven main steps in the dropshipping model:

1. Choose your product(s).
2. Find suppliers of the product(s) that are willing to dropship.
3. List the product(s) on your chosen platforms.
4. Market your product(s) to your target audience.
5. The customer places an order.
6. Dropshipper ships product to your customer.
7. You get paid.

The dropship supplier acts as both a wholesaler and a warehouse and lets the seller act as the retailer/brand.

Chances are you’ve ordered a product that has been dropshipped and didn’t even know it.

 

Overall Benefits Of Dropshipping

The dropshipping model has some overall benefits no matter what products or platforms you choose to focus on.

No inventory to house

In the old days, if you wanted to sell products, you’d better have a place to store the inventory. Thankfully this is no longer the case.

Dropshipping is one of the fulfillment methods making housing inventory unnecessary and taking away the costs of owning or renting warehouse space as your business grows.

Test multiple products with ease

Not sure what products you want to sell? This isn’t a problem with dropshipping.

You can source and test several items for a relatively small fee until you find the right products from the right suppliers.

If you were manufacturing your own products, this wouldn’t be possible under most starting budgets.

And if you still aren’t sure after getting samples of products, you can create a full suite of listings to determine what sells best without having to commit to inventory.

Low barrier to entry

Since the costs to source and test products are low, and you never have to purchase a minimum inventory, it’s easy to get started with the dropshipping model.

Dropshipping allows people who don’t have the funds or the time to make a major upfront commitment the opportunity to get a share of the ecommerce profits.

 

How Does Dropshipping Work On Amazon?



Amazon dropshipping works similarly to dropshipping on other platforms but with stricter rules.

You still won’t be responsible for the housing of inventory or shipping, but you can’t dropship directly from an online retailer either.

Many sellers want to locate products on an overseas online retailer site (like Alibaba) and have those suppliers dropship their products directly to Amazon customers. This is not allowed under Amazon’s rules.

You can still source products that way, but then you need to have them shipped from a third-party warehouse with packing slips that list you as the seller and where you take responsibility for customer returns.

 

Amazon FBA Vs. Dropshipping

Before going any deeper, we need to clarify that Amazon FBA and dropshipping on Amazon are not one-in-the-same.

You can set up Amazon FBA to mimic dropshipping (which may be your best choice), but you can also dropship through Amazon without using the FBA program at all using third-party fulfillment.

As we noted above, Amazon won’t allow you to dropship in the most traditional way (sourcing a product and having it shipped directly from the retailer). Still, it will allow you to have the retailer send your inventory to a fulfillment center that can dropship on your behalf.

Dropshipping using Amazon FBA is more difficult due to their strict packaging requirements and the fact that it will require you to purchase inventory (you just won’t have to touch it).

Many sellers opt to receive their inventory and package it themselves before sending it to the Amazon warehouse, which is not what most people would consider dropshipping.

This guide is to help you use Amazon to dropship on the site whether you are choosing to use FBA or not.

 

Advantages Of Amazon Dropshipping

Using Amazon to dropship comes with a few significant benefits, of course.

NO NEED FOR A WAREHOUSE

The most obvious pro to dropshipping is that you don’t have to pay to buy or lease warehouse space. Warehouses are expensive, time-consuming, and out of reach to most businesses just starting out.

In addition to the cost of the structure itself, you need to pay for a system to manage inventory and staff to help pick, pack, and ship if your brand gets large enough.

Dropshipping isn’t free, but the fees beat the cost and hassle of managing your own warehouse, hands down.

AMAZON DROPSHIPPING SUPPLIERS

Manufacturers know that Amazon has created a crop of third-party sellers looking for the perfect products to sell on the marketplace.

Some suppliers focus solely on providing products for Amazon sellers.

They know Amazon’s rules around packaging and can help guide you in choosing the best products based on their knowledge of what other sellers are purchasing.

Finding a supplier that caters to Amazon sellers can give you a boost when you’re starting out because they will understand the nuances without you having to take them step-by-step.

EASILY SOURCE MULTIPLE PRODUCTS



Even if you don’t work with a supplier who focuses on Amazon, most dropshipping suppliers make it incredibly easy to source their products.

The suppliers also have competition, and they know it’s in their best interest to make their products easy to find and answer any questions you may have about the product.

To get a good idea of the quality you can expect, try to purchase a sample of the product before making an introduction or asking questions, though.

ABILITY TO SELL ACROSS CATEGORIES

Another massive perk to dropshipping on Amazon?

You can test products across several categories at the same time.

Due to products being easy to source and not needing to carry inventory, you don’t have to worry about finding just one perfect product and ordering 1,000 of them.

You can sell vastly different products until you find what works and then scrap the listings that didn’t pan out with no harm done.

HIGH TRAFFIC, TRUSTED MARKETPLACE

You already know that Amazon’s traffic is unparalleled, but so is its trust factor.
Shoppers trust Amazon to take care of its customers, so they are willing to go to the marketplace and purchase from multiple third-party sellers they don’t recognize.

This doesn’t happen when you sell on your own website exclusively. With your site, it generally takes time for customers to trust an unknown brand enough to buy.

EASY SETUP

Your product supplier should provide you with the product details and photos you need to get started. Plus, Amazon makes getting set up as a seller a breeze.

Once you have your products sourced, you could set up your listing in a day and be ready to sell as soon as you have your fulfillment sorted.

AUTOMATE YOUR BUSINESS

After you’ve found a top-selling product or a handful of top-selling products, you can start to automate certain aspects of your dropshipping business even more so you can focus on growth.

With the dropshipping model, you can free up your time to stay on the hunt for the next up-and-coming product and get ahead of your competition.

 

Disadvantages Of Amazon Dropshipping

Amazon offers opportunities you won’t find elsewhere, but that doesn’t mean there aren’t some downsides to account for when dropshipping on the marketplace.

Higher competition

Competition on Amazon is a given. But when you dropship, it adds another level of competition because, on any given day, a host of new competitors could pop up selling your exact product.

This is a risk you take when choosing dropship versus private labeling or developing your own products.

Delivery takes longer

If you opt to use a third-party fulfillment center and not ship your products to an Amazon warehouse, you need to prepare for slower delivery times.

It’s hard to compete with Amazon on speed, especially if you are using an overseas or small warehouse that costs less for fulfillment.

The slower delivery times may cost you sales if most of your competitors are using Amazon for the fulfillment, so you may need to consider offsetting the slow delivery with a price reduction to keep your customers interested.

Quality control may suffer

While it’s great not to have to touch inventory, it can also be a headache.

When you don’t get a chance to inspect your inventory before it is shipped out to your customers, you risk your customers receiving a substandard product that can hurt your seller’s reputation.

Even if you are using Amazon FBA, it’s not their responsibility to check the quality of your products (aside from the damage they may cause).

As you choose a supplier for your products, be sure to ask what kind of quality control measures they have in place. It’s better to pay a little more for a supplier who cares about quality. It may save you money in the end.

 

Dropshipping From Amazon To EBay

Some eBay sellers have used Amazon sellers as a makeshift dropshipping supplier.

These sellers would find low-priced Amazon listings that they could then re-list at a higher price on eBay, making a profit on the difference.

When the customer would receive the product, it came from Amazon, which left many of the customers confused and the Amazon sellers who were being targeted angry.

The bottom line on this is not to go down this path.

If you want to dropship products on eBay, do it ethically with consenting parties.

 

Other Dropshipping Options

You know you can dropship on Amazon and eBay as long as you follow their rules, but where else can you dropship?

Well, depending on where you are located, you may find additional marketplaces like Walmart a viable dropshipping platform to try.

Probably the most popular place to dropship outside of large online marketplaces is on your own website.

For anyone trying to grow a brand and not just sell one-off items, having a website is a smart move.

There are plug-ins and apps (depending on what platform you choose) that allow you to connect your site with dropshipping tools to find products quickly, create listings, and update inventory with a few clicks.

 

Pros And Cons Of Dropshipping On Amazon Vs. Other Platforms

We’re focusing on dropshipping from Amazon in this guide, but dropshipping on Amazon doesn’t prevent you from dropshipping on other sites.

There are some pros and cons to dropshipping on Amazon versus other platforms like eBay and/or your own site.

The biggest con for eBay is that you have to pay per listing and if you set your listing up as an auction and it doesn’t sell, you’ll have to pay to relist it. All of those listing fees quickly add up.

But of course, Amazon isn’t free from its own fees either, considering you will pay 15% or more of every sale, plus Amazon FBA fees if you are using that program as a means to dropship your products.

The upside of dropshipping from your own site is you don’t have to pay a listing fee or a fee per sale, but then you have to figure out how to drive traffic to your site instead of having it provided by the marketplace.

When deciding where you want your products listed, you’ll want to consider all of these factors. You may find it makes the most sense to have your products cross-listed across multiple sites.

 

How To Start Dropshipping On Amazon

Once you’ve decided what products you want to dropship, you’ll need to get them listed on Amazon.

The setup process is relatively easy as long as your product isn’t in a restricted category that requires approval.

As you’ll see in the below screengrab, grocery, jewelry, music, videos, and watches are some of the most commonly requested restricted categories, but there are others as well. For the complete list of categories, take a look at this overview.

Now, if you are starting from scratch, you’ll need to go through the following steps.

Step 1: Create an Amazon seller account. You can opt for an individual account that will charge you an additional $0.99 for each sale or a professional account that will cost you $39.99 per month.

Step 2: Find a supplier for your product if you haven’t already. Before setting up a listing, you’ll need to have your exact products sourced so you can fill out the details, add products, and set the right price.

When setting your price, you need to keep a few things in mind.

• You need to price similarly or lower than competitors’ selling your exact product.
• You need to account for all of Amazon’s fees, including FBA, if that’s the route you are going.
• You need to pre-determine the lowest price you can sell your product for and still make it worth your while.
• If you’ve accounted for all of this, you can move to the next step.

Step 3: Setup your Amazon listing. The supplier will likely be able to provide you with photographs of the product, but if you want to stand out, you should take time to capture unique photographs of your sample, so your listing doesn’t get lost.

You should have also done your keyword research at this point so you can add your most relevant keywords in your title and description.

Step 4: Market your product listing. Unless you’ve identified a brand new product and are one of the first sellers to list it, you’re going to need a marketing strategy.

You can use Amazon PPC or other off-site strategies to get traffic to your listings, but you don’t want to let your product listing sit and gather virtual dust by doing nothing.

 

Amazon Dropshipping: 13 Tips For A Successful Business

1. CHOOSE THE BEST PRODUCTS

Choosing the right products to sell is half of the battle when dropshipping on Amazon.

You have to find products that don’t already have more competition than the market can support.

When deciding on products, make sure there are at least a couple of listings on the first page of the results with less than 50 reviews.

If you aren’t sure what makes a good product, check out our post on product research.

2. GET THE BUY BOX

Over 80% of sales on Amazon will go to whoever wins the buy box.

You don’t want to end up lumped in with the other sellers off the main product page where customers are mainly looking for the lowest price available.

While we don’t know exactly how Amazon decides what listing gets the buy box, we know some of the factors.

To decide who wins the buy box, Amazon considers:

• Price
• Fulfillment method
• Availability
• Feedback
• Seller metrics (like late shipment and return rates)

You need to make sure your product is priced similarly to other listings, it stays in stock, and that you’re providing the best customer service you can.

It’s also extremely helpful if you are using Amazon FBA. Most products that win the buy box are.

3. DON’T SLACK ON MARKETING

It’s not Amazon’s responsibility to sell your product; it’s yours.

Don’t think you can simply list a dropshipping product, then sit back and collect money.

You need to come into dropshipping on Amazon with a sales strategy in place, or you have no chance of being successful.

4. MAINTAIN A STRONG SELLER RATING

Having a high seller rating does two things for you.

1) It makes your listings more appealing to the Amazon algorithms.
2) It makes your listings more appealing to Amazon customers.

Amazon wants customers to have a good experience buying on the marketplace, so they give priority to sellers who have proven they can provide that.

Customers are also more likely to choose your listing over a similar listing if your seller rating is higher. It helps lend your products trust.

5. DON’T SKIMP ON KEYWORD RESEARCH

Without keywords, you may as well not even list your product on Amazon.

Amazon operates as a search engine to connect the products and customers.
For the algorithm to know how to categorize your product, you’ll want to have an extensive list of keywords to use in your title, description, and backend.

You’ll want to have a mix of long-tail keywords and broad keywords to test.

Typically when you’re starting, you want to focus on long-tail keywords since they have lower competition. Then once your listing builds credibility, you can begin transitioning to the higher search volume broad terms.

6. CHOOSE YOUR PRICE WISELY

When your products aren’t developed specifically for your brand, price matters more.

Once you’ve built up your listing, you may be able to get away with pricing on the higher side of the mid-range of similar products, but not at first.

You need to set a listing price that gives your potential customers an incentive to choose your product over another one just like it with more feedback.

7. DON’T FORGET THE POWER OF COUPONS

Coupons can make customers feel like they are getting a deal, even when they aren’t.

Using a slightly listing higher price but then running coupons to give the appearance of a “good deal” is another pricing strategy you can test.

Coupons aren’t available to all sellers, though. Find out if you qualify first.

8. OPTIMIZE YOUR PRODUCT TITLES

The only copy your customer sees from your listing in the search results is your product title.

Your product title is essentially your listing headline. It needs to make shoppers want to know more about your product.

You need to include at least your most relevant keyword in your listing.

Additionally, you may want to include your brand, product materials, and other features like size or color when relevant.

9. MAKE IT ABOUT THE CUSTOMER

When creating your product listing, you want it to be focused on what your customer gets from your product.

The features need to be linked to how your customers benefit from them.

By making your listing customer-centric, you are making your product appear like a better solution to their problem than the other products with the same features.

10. BUILD YOUR BRAND

How many products have you seen on the market that sell for 2-5x the amount of their competitors all because of a logo?

Probably a lot.

Clothing and beauty are categories notorious for this, but it doesn’t stop there.
Creating a brand creates a relationship with your customers.

If you want to sell a similar product but not sell on price alone, you’ll need to build a brand.

11. ALWAYS ORDER SAMPLES

You should never send products to customers that you haven’t at least handled a sample of to check the quality and understand the features.

Without having seen and tried the product, you won’t be able to verify product details to differentiate your listing.

You also won’t be able to answer customer questions accurately.

The best option is to order multiple samples of the same product from different suppliers, so you know you’re selling the best option available.

12. GO WIDE BEFORE GOING DEEP

One massive benefit of dropshipping is how easy it is to list and test a large volume of products.

This increases the likelihood of finding a high-performing product that you can run with.

Go ahead and find at least a handful of interesting products to test in a few different categories to prevent yourself from having to go back to the drawing board if a product doesn’t work out.

13. PAIR WITH ANOTHER ECOMMERCE PLATFORM

Choosing to sell on an additional ecommerce platform isn’t a necessary part of dropshipping on Amazon, but if you’re trying to build a brand, it can’t hurt.

Depending on your dropshipping strategy, either Shopify or BigCommerce could work well.

We’ll look at using either of those platforms as a tool in the next section.

 

Bonus: Amazon Dropshipping Tools

SHOPIFY OR BIGCOMMERCE

If you choose to sell on both Amazon and your own site, there are benefits to using Shopify or BigCommerce.

Shopify allows you to cross-list your products on Amazon, but Amazon will not fulfill your Shopify orders, so it’s not the ideal setup if you are using FBA.

However, Amazon does have a deal in place where you can use FBA to fulfill BigCommerce orders.

KEYWORD FINDERS

To optimize your listings for search and to create PPC campaigns, you’ll need to find the right keywords for your products.

There are plenty of keyword tools out there, but a few we recommend are:

• Keyword.io
• Sonar
• Helium 10
• Ahrefs
• Google Keyword Planner

Even though some of the tools are geared toward Google searches, if a person is searching the keyword in Google, there is a good chance they are also searching it on Amazon.

REPRICING TOOLS

When you are using the dropshipping method, you will have to compete on price to a degree.

You don’t want to have to constantly monitor your competition in case they change their price, so we recommend you use a repricing tool.

Check out Repricer or Sellery for implementing your repricing strategy.

FEEDCHECK AND FEEDBACK EXPRESS

You need to monitor and encourage customer reviews. These tools allow you to do just that.

FeedCheck lets you see all of your reviews across all of your products in one convenient place; that way, you can stay on top of them.

Feedback Express will help you increase your customer reviews and to take care of the negative reviews you want to get removed that violate any of Amazon’s terms.

AMAZON LISTING TOOLS

Amazon offers a host of listing tools to help you create and manage multiple listings more efficiently.

They also have tools that can help you stay on top of your inventory should you choose to go the Amazon FBA route.

 

Use Amazon PPC To Grow Your Brand

Branded products sell better because they help create a sense of ownership over the product. It makes the customer more confident that someone cares enough about the product to stand behind it.

But growing an Amazon brand isn’t an overnight process.

It requires time and, more importantly, strategy.

Once you’ve found a winning product category that you want to double down on and create a brand around, we’re here to partner with you to grow your brand.

From increasing reviews to improving your product ranking, we handle all the optimization and marketing so you can focus on finding your next big products.

 

Final Thoughts

Using Amazon for a dropshipping business is a model that has seen a lot of success.

But possibly the best way to “dropship” on Amazon is using the FBA program, which requires more upfront work than traditional dropshipping.

Whether you choose to handle your business entirely through Amazon or by connecting Amazon to a third-party fulfillment warehouse to dropship, be sure to follow the tips outlined in this post for your best chance to come out on top.

Alex Stoykov

Alex Stoykov

Over his career, Alex has developed and marketed millions of dollars of successful products. He lays awake at nights figuring out new marketing tactics and is constantly upping clients' marketing game.
Alex Stoykov

Alex Stoykov

Over his career, Alex has developed and marketed millions of dollars of successful products. He lays awake at nights figuring out new marketing tactics and is constantly upping clients' marketing game.
Alex Stoykov

Alex Stoykov

Over his career, Alex has developed and marketed millions of dollars of successful products. He lays awake at nights figuring out new marketing tactics and is constantly upping clients' marketing game.

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