Looking forward to selling on Amazon but low on investment? Dropshipping on Amazon is the way to go.
Amazon is one of the most recognized brands in the world. Since they own the largest logistics network globally, more sellers tend to work with them. And the requirements for selling on Amazon are basic. Even if you don’t own any product, you can start selling on Amazon with their dropshipping business model. But, you might need a helping hand in starting your journey with this model.
In this post, I will go through a complete guide on how to dropship on Amazon. I will also explain different types of dropshipping options so you can easily choose one that suits you best. But first, let’s know about dropshipping.
Table of Contents
- What is Amazon Dropshipping?
- Dropshipping Options on Amazon
- How to Dropship on Amazon?
- Successful Tips for Dropshipping on Amazon
- Fulfillment by Amazon: An Effortless Dropshipping Model
- Potential Pros and Cons of Dropshipping
- Final Words: Is Amazon Dropshipping Right For You?
What is Amazon Dropshipping?
Dropshipping is a business model where you find a third-party vendor that takes responsibility for fulfilling the inventory and order placement. Amazon’s Dropshipping business model also works like that. Basically, you promote products and provide customers with a storefront. Dropshipper fulfills your order while you keep your hands out from the physical fulfillment process.
As an example, you list a product for sale, but at this point, you don’t have the product and haven’t spent any money upfront. When a customer places an order from your store, you buy the product and have it shipped to the customer’s doorstep.
How Does Amazon’s Dropshipping Model work?
Here’s how Amazon’s drop shipping model works.
- Customer places an order:
- Seller receives order
- The seller forwards the order to the drop shipper
- Dropshipper prepares and ships the order
- The customer receives the order
Dropshipping Options on Amazon
Currently, Amazon offers three options for the dropshipping business model.
Online Arbitrage is an intelligent way of reselling products at a higher price. Merchants purchase under-priced products from local online stores and resell the same products on Amazon at a higher price. The small margin you increase becomes a profit, and technically, you are managing any inventory.
The Arbitrage option only works best for Amazon FBM (Fulfillment by Merchants).
Private Label is a little bit different from Online Arbitrage. Instead of purchasing items from other retailers, you directly purchase from the manufacturers or production facilities. You have legal rights over brands even if you don’t manufacture goods on your own.
Print on Demand (Merch by Amazon)
Print-on-Demand (POD) is a great way of selling your products without owning the products. In this method, you create designs for products and order the units to be printed by a POD company. You list the products on Amazon, and when a customer places an order, the POD company ships the product to the customer. You can find a lot of POD partners for Amazon, such as Printful, Merchize, Shirtee, Gearment, and so on.
Amazon also offers a print-on-demand facility to their merchants, Merch by Amazon. You can upload your artwork/design, and whenever customers purchase a custom-designed product from your store, you earn a royalty for each product sold. You don’t even need a single penny to get started with Merch by Amazon.
Now, let’s know about dropshipping on Amazon.
How to Dropship on Amazon?
Once you have decided which type of dropshipping to go with, you can follow these steps to start your dropshipping business.
1. Create an Amazon Seller account
If you want to sell on Amazon, you will need to create an Amazon Seller account. You can visit Amazon’s Seller Central page and click on the Start Selling button to create a new seller account. You will just need to fill in your name, email address, and password to create the account.
2. Choose a suitable plan for your seller account
Amazon offers two plans to their sellers—Individual and Professional. You can choose the Individual plan that charges $0.99/item when it gets sold. You can only sell 40 units or less per month with this plan.
On the other hand, the Professional plan is a subscription that costs you $39.99 per month, and there is no order minimum. With this plan, you will also get additional benefits.
3. Find a high demanding product to sell
Next, you must find a high-demand product to sell on Amazon. It would be a lot easier to sell if the product is low-competitive as well. You can use Jungle Scout’s Opportunity Finder tool to find potential products to sell. You can select a category and sort out the filter based on your preferences to find the perfect product.
Here’s an example of using filtration to find a product.
- Category: Select one or multiple categories
- Sales Range: 100 to 300 units per month
- Monthly Search Volume: 1000 to 10,000
- Average Monthly Price: $20 to $35
- Niche Score: 7+
- Competition: Very low to low
After setting up your preferences, you will find tons of products on search results. Choose a potential product and move forward to source the product.
4. Get in Touch with Suppliers
Product sourcing is the next crucial step you will go through. However, it depends on the type of dropshipping you have chosen. You can go with a POD partner or find a third-party supplier to fulfill your orders. If you have chosen a print-on-demand partner, just order the number of units that you want to be printed after uploading your design.
You can also find suppliers on AliExpress to drop ship products on Amazon. Simply search the product you have selected, and you will find a bunch of suppliers for order fulfillment. You can contact interested suppliers according to the minimum orders you need.
5. Create an Amazon Listing
Now that you have found a product and a supplier who’s going to fulfill your orders, it’s time to create an Amazon listing.
You can create an Amazon listing by going to your Amazon Seller Central account and clicking on the Catalog. You can select “Add Products” and then “create a new product listing” in this section. To create a product listing, you’ll need to select a category and fill in all the information about the product by yourself, including uploading relevant product images.
If you’re selling private label products, you have to choose “I am adding a product not sold on Amazon,” and for that, you will need a Product ID (UPC barcode). You may have to purchase a product ID in order to assign product variation.
6. Start dropshipping
You have gone through all the necessary processes for dropshipping. Now, you can set a price for your product. Keep the referral fee and additional $0.99 fee (if you’re using an individual account) in mind before setting up the price for the product. Referral fee ranges from 8% to 15%, depending on the category.
After that, you can publish your listing and start selling.
Successful Tips for Dropshipping on Amazon
Even if you follow all the steps to dropship on Amazon, it is not necessary that customers will come to your storefront and will place orders automatically. However, you can follow some proven tips to get success with dropshipping.
Promote Your Listing
To get more traffic to your storefront, you must find ways to promote your product listing. You can use Amazon PPC, an internal advertising system of Amazon, to promote your products. It is a paid method that puts your products on the top in a particular search result.
You can also use organic methods such as social media promotion, SEO, case studies, guest posts, etc., to promote your products. Usually, this method takes time, but you will not need to spend money.
Target an Audience
Your selected product pretty much decides what type of audience you should target. If you’re selling baby products, your target audience should be parents aged 25-35. Shoppers are more concerned about the quality and the value your product provides.
The quality of the product is in your hand while you must identify the value of your products because it is what makes your dropshipping business stand out. You can spy on your competitors to find out what you are missing.
Focus on your Brand
In a dropshipping model, you are selling a product whose production and design are not in your control. Apart from that, multiple sellers might have been running their business under your supplier. In that case, you should focus on your brand since you are not having much of competitive advantage.
You can increase your brand’s value by giving beautiful visual elements, keeping the prices reasonable, maintaining quality, advertising among relevant audiences, and more.
It’s important to know what you are selling and what your customers are receiving. You can order a sample from a supplier as a customer to inspect the product’s quality. It would be better if the supplier didn’t recognize you as a potential drop shipper.
Getting samples in advance will give you live proof of the packaging, what’s inside it, and delivery time.
Cast a Broad Network
If you are getting decent sales with one product, that doesn’t mean you can’t sell other products. You can also try other products to increase your revenue.
You can target a different audience with multiple products. Maybe some of them won’t be successful, but others will surely succeed. You can go with successful ones by cutting the rest.
Fulfillment by Amazon: An Effortless Dropshipping Model
If you have a product to sell but don’t have enough connections to start as an FBM seller, you can try Fulfillment by Amazon FBA as a start. FBA allows you to reach your customers without worrying about storage, packing, and delivery—the Amazon fulfillment center handles almost everything.
In this model, all you have to do is ship your products to the Amazon fulfillment center, and that’s all. They store your products carefully and wait for orders to be placed. When a customer places an order, they pack it and deliver it to the customer’s doorstep.
Here are some benefits of using the FBA dropship model.
- Your products get stored in Amazon warehouses
- Quick delivery across the globe
- Handles returns
- 24/7 customer service
- Notifies you before your inventory gets out of stocks
You can get all these services at an affordable handling cost. Consider it a great option if you are manufacturing products under a brand.
Potential Pros and Cons of Dropshipping
Every business model has its own advantages and disadvantages. In the end, it all doesn’t matter as long as you are profitable.
Advantages of Dropshipping
- Minimal starting cost: Starting a dropshipping business doesn’t require a heavy investment. You can get access to the supplier’s inventory with a fixed amount.
- No overhead cost: In this model, you will not be charged any overhead cost since you are not handling production, storage, or delivery.
- Sell multiple products with fewer risks: With no overhead cost, you can sell your products without worrying about fulfillment. You can also test new products since you are not carrying much of a stretch.
- Operate from anywhere: Dropshipping business doesn’t require a specific place to operate. Since you are handling everything online, you can operate from anywhere in the world.
- Multichannel selling: You can sell a particular product on multiple channels using the multichannel dropshipping method. You can sell a product on Amazon, Shopify, BigCommerce, PrestaShop, Magento, and more through this method.
- Highly scalable: If your products are in demand, you can increase your sales without worrying about inventory.
Disadvantages of Dropshipping
- High competition: Dropshipping business can be highly competitive since it requires low investment.
- Low-profit margin: Your estimated profit margin can be low since you are not managing any inventory.
- Less control over quality: Your lack of involvement in the fulfillment process gives you less or no control over quality.
- Difficult to build a brand: You are not selling the products under your brand name. Customers will always choose a brand over a shopping experience that they can find under any seller.
Final Words: Is Amazon Dropshipping Right For You?
Amazon’s Dropshipping business is a low-risk model. You don’t require a lot of investment and overhead costs to get started. Among all the best things, you are generating profit without keeping your products in stocks. All you have to do is find a product and a drop shipper who will manage inventory and fulfillment processes.
If you own a brand and control your production, FBA is the best option for dropshipping. Its profit margin is high, and you can sell your products globally.