How to Start Dropshipping on Amazon in 7 Easy Steps

Introduction

Are you eager to dive into the world of e-commerce and explore the exciting opportunities that Amazon has to offer? If you’re curious about dropshipping and how to get started with this popular business model on Amazon, you’ve come to the right place! In this step-by-step guide, we’ll walk you through the ins and outs of Amazon dropshipping, specially tailored for beginners. Embrace your entrepreneurial spirit and let’s discover the secrets to success in the world of Amazon dropshipping!

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What Is Amazon Dropshipping?

Dropshipping is a popular business model on Amazon where sellers simply list their products on Amazon without inventory. After a sale has been made, the seller who listed it on Amazon contacts their third-party supplier (either manually or automatically through API connections) who will then manufacture, package, and ship the product to the customer.

Understanding Amazon’s Dropshipping Policies

Dropshipping on Amazon is not allowed unless you explicitly disclose that you are the seller, and not a third party. Below, you can see a few examples of policy violations that may see you banned from selling on the e-commerce platform:

• When purchasing your items from a third-party or a fellow Amazon seller, and then having them ship that item to your customer, your name needs to appear as the ‘seller of record’ (the main seller). If the name of the third party appears on the packing slips, invoices, or external packaging, this may result in a ban.
• If the shipping orders containing packing slips, invoices, external packaging, or additional relevant information show a third-party seller instead of yourself, this may result in a restriction or ban from using FBM.

Keep in mind that customers may get confused or worried they received the wrong package if your name does not appear on the above item information. Also, if any problems with the product or delivery occur, they may not be able to easily get in touch with you to rectify the issue.

If you do decide to dropship using a third-party seller, you’ll need to closely follow these steps:

• Ensure that you have a thorough understanding with your supplier that you are the only seller. This also includes having your name appear on all the information the customer will receive.
• If information including packing slips, invoices, and external packaging shows the name of the third-party seller, remove it.
• Take full responsibility for customer returns while ensuring that you follow the Business Solutions Agreement and any other Amazon policies that apply.

Pros and Cons of Amazon Dropshipping

Even though Amazon dropshipping has many positive aspects, there are also some downsides that new sellers should be aware of as well. Take a look at some pros and cons related to dropshipping below.

Dropshipping Pros

Low Start-Up Costs: Unlike other methods of selling on Amazon such as private label or wholesaling, dropshippers will not have to possess inventory themselves. Rather, they can just request the item from their supplier whenever a customer orders their product on Amazon.

Quick Set-Up: Since there isn’t a need to take care of any inventory tasks before beginning to sell on Amazon, dropshippers can expect a rapid set-up of their e-commerce store on the platform.

More Discoverability: Amazon, thanks to its prestigious position in the world of e-commerce, enjoys a huge audience and many different product categories they can choose from. With this knowledge, smart Amazon dropshippers, by finding the right product, can really make their business take off.

Completely Automated: One of the top ways to make passive income on Amazon is through dropshipping. This is thanks in large part to the many apps and browser plugins that allow you to sit back and relax while your business runs itself.

Dropshipping Cons

Lots of Competition: If the pros of dropshipping sound fantastic to you, then it’s safe to assume that many others feel the same way. With so many dropshippers (both new and old) existing on Amazon, competition can be fierce and—at times—cutthroat.

Reduced Quality Control: With other forms of Amazon selling, sellers have more control over the quality of their products. Dropshippers, though, are forced to sometimes sacrifice quality, which may end up sinking their company if too many of their products receive bad reviews.

A Large Upfront Investment: Dropshippers will be required to have at least some products from their supplier in their inventory in order to satisfy Amazon’s fulfillment requirements. In simple terms, this means that you’ll need to hand over a good chunk of change before you can get started.

How Does Dropshipping Compare to Other Selling Methods?

Dropshipping vs. FBA

• When dropshipping, you’ll never have to worry about shipping a huge number of items to Amazon. Instead, all you have to do is find a good supplier who will then ship the products themselves whenever they are ordered by an Amazon customer.
• One of the main characteristics of Amazon FBA, on the other hand, is the large customer base you can take advantage of. With this large audience, you can potentially scale your business faster, thereby making even more of a profit.
• A key difference between the two lies in where they can direct customers. Dropshippers have the ability to guide their audience to their own Amazon storefront while Amazon FBA sellers can only use the Amazon sales page listing that is available to everyone.

Dropshipping vs. FBM

• Sellers who use Amazon FBM rather than FBA are required to carry their own inventory while also handling the shipping to each of their customers. Dropshippers can avoid the extra work by easily having their third-party seller ship the product directly to the customer’s door.
• FBM merchants can customize the shipping process to their liking since they have complete control over the entire process. Keep in mind, though, that they’ll also be responsible for both timely and accurate orders. When you dropship, you are unable to customize your shipping details, but you can also avoid the sometimes stressful responsibility that comes with FBM.
• FBM sellers have easy access to the entire Amazon marketplace (and the vast audience that goes along with it). The ability to access the Walmart marketplace, too, is a benefit of selling FBM. Dropshippers, though, usually cater to a smaller audience in most cases. However, they can potentially increase their audience if they effectively market themselves or have an Amazon marketing agency do it for them.

Dropshippers vs. Retail Arbitrage

• Retail arbitrage sellers can purchase all their inventory from physical store locations while discovering potential discounts that can then help them get a better ROI (return on investment) on Amazon. Dropshippers act differently since they avoid purchasing any inventory themselves, instead relying on their third-party contacts.
• The amount of profit retail arbitrage sellers are able to receive largely depends on the prices they originally bought their items at and what they can then resell the products on Amazon for. This can net them sizable profits if done right. Dropshippers cannot do this (and usually experience low-profit margins) since they need to pay the wholesale price to the third-party seller in addition to the order fulfillment charge.
• Business scaling for retail arbitrage is all dependent on whether the seller finds good, discounted products or not. This often takes a large amount of time and can become exhausting. Dropshippers avoid this entirely by listing a range of products from all over, allowing them to scale their business at a potentially rapid pace.

Dropshipping vs. Online Arbitrage

• Using online arbitrage, Amazon sellers are able to purchase their inventory from many e-commerce sites around the internet at discounted prices, and then sell them on Amazon for a profit. Dropshippers do something similar, but avoid having to purchase inventory.
• Online arbitrage sellers spend many hours researching viable products at discounted prices from different e-commerce sites. With dropshipping, these sellers can check out their third-party supplier’s catalogs to make finding products much easier.
• Sellers who utilize online arbitrage are able to have complete control over key facets of their business including buying, logistics, branding, and selling. Dropshippers, however, are unable to do this. Instead, all of these important aspects are handled by the third-party seller.

Dropshipping vs. Wholesale

• Wholesale sellers effectively control their branding and packaging, along with all the other parts of the Amazon selling process. Dropshippers avoid this, though, by having their third-party supplier take care of this for them.
• Wholesalers are potentially able to earn a huge amount of money when they buy bulk products from manufacturers or on return pallets and then sell them bit by bit to their Amazon customers. Dropshippers usually receive less profits overall due to the costs paid to their supplier.
• By building strong and lasting relationships with manufacturers, wholesalers are able to have a distinct advantage over other types of sellers on Amazon. Dropshippers, while they may build these relationships with their suppliers, are most likely not as influential as working with manufacturers.

Amazon Dropshipping Fees

Referral Fees

For every product you sell on their platform, Amazon deducts a referral fee percentage on top of the total sales price. This also excludes the taxes calculated via Amazon’s tax collection services.

Additionally, the total sales price is simply the total amount paid by the customer and includes both the item price and the delivery and gift wrapping charges (when applicable).

Monthly Subscription Fees

If you have a professional vs an individual selling plan, you will need to pay a monthly subscription fee to access the many seller tools such as bulk listings, Amazon Marketplace Web Service, advanced business reports, and more.

If you find that these tools don’t really help you succeed on Amazon, check out Helium 10’s Amazon seller tools to leap ahead of the competition on the platform.

Per-item Selling Fees

For those who have an individual selling plan, you’ll need to pay a small per-item fee for every item that you sell on Amazon. Keep in mind that this is in addition to other applicable fees.

Closing Fees

If you’re selling media items, you’ll be required to pay a closing fee for each unit sold. Again, this is on top of any other additional, applicable fees.

How Profitable Is Amazon Dropshipping?

Amazon dropshipping, even though many are already doing it, can still be profitable for the knowledgeable seller. Additionally, dropshippers should try to aim for a 15-30% profit margin—after all their expenses are paid—while ensuring that their pricing strategy remains competitive.

To make this complicated process much easier, Helium 10 provides a Profitability Calculator within the free Amazon Chrome Extension tool, along with a host of other useful features.

To find the Profitability Calculator specifically, open the Chrome Extension and click on the blue Helium 10 Chrome Extension button on the right of the URL bar at the top of your screen.

Next, scroll down until you see the Profitability Calculator tool.

After clicking it, you’ll be taken to a pop-up that shows you the product specifications for the item you are currently looking at.

How to Start Dropshipping on Amazon in 7 Easy Steps

1. Find and Validate a Product

The first step is finding products that are in high demand, yet have low competition. While this process may take a significant amount of time if you’re doing it yourself, Helium 10’s Amazon product finder tool (Black Box) can find this information in less than a minute by adding filters such as:

• Category = Health and Wellness, Beauty and Personal Care, Electronics and Tech Accessories, Baby and Kids, or Fashion and Accessories typically generate a lot of sales
• Review Count < 30
• Review Rating < 4
• Shipping Size: Small Standard Size
• Weight < 3 lb
• Fulfillment = FBM
• Number of Sellers < 3
• Monthly Revenue > $1,000

Finding a high-demand, low-competition product is usually not enough, though. To really stand out on Amazon, you’ll need to find high search volume, low competition SEO keywords that will help you gain visibility for your products. Thankfully, we offer those tools as well in the form of Magnet (which helps you conduct exploratory keyword research) or Cerebro (which helps you identify your competitor’s keywords).

Once you’ve found some powerful keywords you can leverage in your product listing, you should further analyze your competitor’s listings using a combination of Listing Analyzer (which looks at the listing itself), Review Insights (for checking out your competitor’s reviews), and Market Tracker 360 (to then verify the market to see if it’s profitable).

2. Find a Supplier

The next step is to discover a good supplier who you can work with long-term within the country you’re selling from. Instead of leveraging Alibaba or AliExpress like many Amazon FBA and FBM sellers do, you should try to find a U.S. based platform like Zendrop, Spocket, and Inventory Source to cut down on lead times. Ideally your product would arrive to the customer within 5-7 business days of placing the order, which is not as feasible with foreign suppliers.

Quick Disclaimer: While the three above supplier sites may work for you, Helium 10 does not specifically endorse them.

3. Set Up a Shopify Store and Amazon Seller Account

After you’ve found a supplier, you’ll then need to create both a Shopify store and Amazon Seller Account. When both of these are created, you can then link them together, which you’ll want to do since the linkage provides seamless inventory and order management, greatly helping reduce the stress of manually operating a dropshipping business on Amazon.

4. Configure and Optimize Your Product Listings

Now, you’ll want to optimize your product listing with the price and any keywords you’ve found in the course of your research.

For the price, it’s recommended to set it within a 15-30% profit margin, although competitively pricing your product is important, too.

Regarding keyword optimization, we encourage you to use our Listing Builder to help create a winning listing using the keywords you’ve gathered.

5. Leverage the Amazon Vine Program

Even though your listing is created and live, there’s still some work left to do in the form of the building high-quality reviews/ The Amazon Vine Program helps boost your product reviews which are crucial for sellers beginning to sell on Amazon. People who are serious about hitting the ground running with their Amazon business will go all in on doing whatever they have to do to get high-quality reviews, as it’s essential for ranking well in Amazon’s search engine.

6. Run Sponsored Product Ads

In addition to joining the Vine Program, we recommend that new dropshippers run PPC ads for their most valuable, hyper-relevant keywords. This is because, in most cases, your product visibility will be low, leading to fewer sales.

7. Provide Excellent Customer Service

The final step in Amazon dropshipping may seem easy, but actually contains hidden depths you may not have considered before. In addition to responding to customer reviews, you’ll also need to do the following to the best of your ability:

• Reduce the shipping times as much as possible by working with your supplier 
• Test the products before you sell them, 
• Provide a good refund policy
• Give full refunds to negative reviewers or offer discounts on other products
• Effectively manage your returns

5 Pro Tips to Be Successful With Amazon Dropshipping

1. Price Competitively

One of the most important things to do before you even think about setting the price of your Amazon product is to compile all your fees such as your monthly Amazon fee and fulfillment fees.

To be really successful as an Amazon dropshipper, you must have high margins in order to generate a healthy profit. This is why your profit margin should specifically be between 15-30%. You can use Helium 10’s profitability calculator within our free Chrome Extension to figure out just how profitable a competing product is, and adjust variables to find the right combination (i.e. reduce size / weight, adjust pricing, compare supplier pricing, etc.) for your business.

2. Build a Brand

The primary negative aspect of dropshipping is that you aren’t able to have much control over your product. This can make it hard to build a brand that can outperform your competitors, some of whom are selling the exact same thing as you.

However, even though it may be difficult to do so, building a brand from $0 to $20M+ that your customers both recognize and want to shop with is crucial to building an Amazon store that stands the test of time. You can work with various suppliers to add branding to your products in a way that resonates with your core audience.

Remember, Ralph Lauren wouldn’t be able to charge what they do if they had a blank shirt with zero marketing behind it. Brand recognition and effective marketing have allowed them to create the idea in consumers’ minds that they embody class and sophistication, making consumers want to actively seek them out whenever they go shopping.

3. Create Incredible Listings with A+ Content

Always relevant to your customer and their specific search queries on Amazon, A+ content including product titles should not be stuffed full of keywords. Rather, they should include the brand name and product attributes including size, color, and make. This allows your titles to be both descriptive and informative.

Be sure to truly understand your customers’ pain points and what you’re solving for via your product, and leverage that throughout the messaging. Think beyond highlighting benefits / features; what are you actually helping them do with this product?

4. Win the Buy Box

When selling on Amazon, you can potentially see a huge boost to your sales and visibility if you win the Buy Box.

The Buy Box is a section of Amazon that lives on the product page and allows customers to buy your item with one click. If you’re the seller in your category that has the Buy Box, it will most likely end up delivering an increased number of sales on Amazon.

So, how do you get the Buy Box? Well, there are a few things you’ll need to have a good history of including:

• Seller rating
• Selling history
• Product fulfillment

Once these and other important factors are considered by Amazon and compared to other sellers in your niche, you may then be awarded the Buy Box.

5. Leverage Multiple Digital Marketing Channels

Even though Amazon is the primary area you should focus your attention, it pays to diversify by advertising on other platforms, such as Instagram, TikTok, YouTube, Google Paid Search, Google Organic Search, etc.

You should consider optimizing your Shopify or WordPress site from an SEO perspective (and build backlinks to your pages through outreach to blogs within your niche), as well as set up PPC ads through Google Ads and Bing Ads. By optimizing for SEO first, you’ll effectively be improving your landing page score which will lower PPC bid costs on Google Ads. Having quality reviews with review schema, including FAQs for on each product page, having keyword driven category pages, and many other tactics will put your store in the best position possible to succeed on Google.

If you’re able to work with influencers via TikTok or Instagram, you’ll be able to tap into their markets. So long as you understand your ideal customer profile (ICP), you should be able to figure out which people your ICP follows and run ads directly to them (through Facebook / Instagram’s ad platform via custom audiences). You can even set up a pixel on your site to run remarketing ads for people who visit particular pages on your site, which are typically low cost and high-value since they’ve already qualified themselves by visiting your collections / product pages. Also consider using your existing email list to run ads to former customers or build lookalike audiences.

Conclusion

You’ve now reached the end of our step-by-step guide to Amazon dropshipping for beginners. We hope this guide has provided you with valuable insights and practical knowledge to set you on the path to success. Remember, dropshipping on Amazon is not without its challenges, but armed with the right information and strategies, you can overcome them and build a profitable business. Stay committed to continuous learning, stay up-to-date with industry trends, and always prioritize providing top-notch customer service. Whether you’re looking to supplement your income or create a thriving online empire, the possibilities are endless. Now, it’s time to put your newfound knowledge into action, take that leap of faith, and embrace the exciting world of Amazon dropshipping. Wishing you the best of luck on your journey ahead!

FAQs

Frequently Asked Questions

How Much Does It Cost to Start Dropshipping on Amazon?

While you can get started with $500-$1,000, it’s recommended that you start with $5,000. This amount will allow you to invest in Amazon PPC ads and the Vine Program for your top 10 products.

Is Amazon Dropshipping Profitable?

Yes, Amazon dropshipping is profitable. Ultimately, though, it all depends on how you source your products, how much you list them for, and what’s remaining after Amazon takes its cut.

Is Amazon Dropshipping Hard?

While Amazon dropshipping can be challenging at times, you can make the process easier and more streamlined after you start gaining experience. You can help make your business run smoother more quickly by coordinating with suppliers and effectively managing your inventory.

Is Amazon Dropshipping Worth It?

It can be. You can find success with Amazon dropshipping depending on key factors such as effectively analyzing profit potential and operational capabilities, accurately identifying risks, and having a goal in mind while, at the same time, closely adhering to Amazon’s policies to avoid having your account banned.