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Amazon Dropshipping 101: A Step-By-Step Guide To Success [2023]

by Irene Leander
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Amazon Dropshipping 101: A Step-By-Step Guide To Success - OneCommerce

You want to start your own dropshipping store on Amazon, the world’s largest online marketplace. That’s awesome!

But be ready to face some challenges: Amazon dropshipping in 2023 is not a walk in the park. You have to deal with fierce competition, constant rule changes, and high expectations. You need more than just passion – you need knowledge and skills.

That’s why this guide is here for you. It will show you everything you need to know to start and grow your Amazon dropshipping business in 2023.

Are you ready to take your dropshipping dream to the next level? Let’s dive in!

 KEY TAKEAWAYS

  • Amazon dropshipping means you sell products on Amazon without having to buy, store, or ship them yourself, but instead rely on third-party suppliers to fulfill the orders for you.
  • Amazon dropshipping can be a smart choice for those who are just starting their online business journey.
  • To start dropshipping on Amazon, sellers need to sign up for an Amazon seller account, conduct product research, and find a reliable supplier

What Is Amazon?

Amazon is an eCommerce website, or more specifically, a worldwide online retail platform operating on the global internet. It is owned by Amazon.com Inc., a company founded in the year 1994.

The products on Amazon are incredibly diverse, offering a vast warehouse of choices for consumers, categorized into three main types:

  • Amazon’s products: These items are managed and sold directly by Amazon. They are guaranteed and shipped by Amazon.
  • Amazon Partner Products: These items are listed by registered agents who are partnered with Amazon. These products are assured and supported for shipping by Amazon.
  • Seller Listings: These items are listed by individual sellers, resulting in a wide variety of items in terms of type and price. This is the category that can potentially involve dropshipping.

Furthermore, Amazon has many trusted Amazon dropshipping suppliers that sellers – like you, can partner with to offer a wide variety of products to customers.

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How Does Dropshipping On Amazon Work?

Amazon dropshipping is a way of selling products online without having to buy or store them yourself. You can use Amazon’s huge website to show customers a range of products that you choose.

When customers buy a product from you, you order it from another Amazon supplier who ships it directly to the customer. This way, you don’t have to deal with inventory or shipping.

amazon dropshipping process

Amazon dropshipping process (Credit: Amazon)

However, it is crucial to understand Amazon dropshipping policy to avoid some problems such as suspended seller accounts.

✅ Things you MUST DO:

  • You must adhere to Amazon’s Terms of Service
  • You must indicate yourself as the seller on your invoices, outer packaging, and packing slips.
  • You must be responsible for all of the processes related to product returns.

❌ Things you MUST NOT DO:

  • Send out orders with packing slips, invoices, or any details that show a seller’s name or contact information other than yours.
  • Acquire items from a different seller and have that seller send them to your customers.
  • Use unauthorized use of trademarks, taglines, or images.

Pros And Cons Of Dropshipping On Amazon

Engaging in dropshipping on Amazon presents both positives and negatives. It’s essential to thoroughly evaluate these aspects before determining if this business model aligns with your goals.

Pros Of Amazon Dropshipping

  • Low investment cost: Dropshipping model typically requires minimal upfront investment since you don’t need to purchase and hold inventory beforehand. This financial relief can be especially advantageous for entrepreneurs and small businesses with limited resources.
  • Wide product range: Amazon dropshipping offers you a choice of over 30 different types of products to sell. This versatility can help you cater to different customer preferences.
  • Smooth entry: You can test various products and niches without committing to large quantities, helping you identify profitable opportunities.

Cons Of Amazon Dropshipping

  • Intense competition: The accessibility of dropshipping as a business model has led to a saturated market on Amazon. With numerous sellers vying for customer attention, it can be challenging to differentiate your offerings and gain a competitive edge
  • Low profit margin: The competition, combined with Amazon’s fees, can result in lower profit margins compared to other business models. The fees associated with listing, referral, and fulfillment can lower your earnings.
  • Policy changes and account suspension: Amazon’s policies and algorithms are subject to change, which can disrupt your business strategy. Violating these policies can result in penalties or even account suspension, affecting your revenue stream.

Amazon Dropshipping vs Amazon FBA: What is the difference?

The confusion or misunderstanding between Amazon dropshipping and Amazon FBA commonly occurs among those who are new to selling on the platform.

The main distinctions between dropshipping and FBA are related to:

  • Who covers the cost and storage of inventory
  • Who takes care of shipping
  • Investment cost and profit generation

Here are some key insights that compare these two options:

Characteristic Amazon Dropshipping Amazon FBA
Inventory ownership You don’t own the inventory.

When a customer places an order, you purchase the product from a third-party supplier who then ships it directly to the customer.

You own the inventory.

As a seller, you procure products from different Amazon dropshipping suppliers or manufacturers, and you are responsible for sending your inventory to Amazon’s fulfillment centers.

Customer base Hard to reach Easy to reach
Investment cost Low Medium
Customer experience Hard to control Easy to control
Sales Paid advertising Through organic traffic and keywords
Time required for profit From the first sale Around 3-6 months 

After all, each one has its unique advantages, but do you know what is more suitable for your online business stores?

If you’re at the initial stages of launching your online business, choosing the Amazon dropshipping model can be a wise decision. It allows you to start with fewer financial commitments and provides flexibility in testing various products and niches.

On the other hand, if you already have an established online business and are aiming to elevate it to the next level, Amazon FBA could be the better fit. This program suits businesses that are ready to invest in inventory, seek efficiency in order fulfillment, and aim to tap into the benefits of Prime eligibility and Amazon’s extensive logistics network.

Ever wonder what sets Shopify and Amazon FBA apart? Check out Amazon FBA vs Shopify: Which Is Better?

How To Start Dropshipping on Amazon?

Starting dropshipping on Amazon involves 7 steps to set up your business and begin selling products.

Step 1. Plan your Amazon dropshipping business

Having a well-thought-out plan is pivotal for your entrepreneurial success. Remember to checklist all the necessary information such as your business identity and branding, product niche, competition, trends, and potential profitability.

💡 Some useful guides to help you get started:

Step 2. Set up an Amazon seller account

Sign up for an Amazon Seller Central account. There are 2 options for you to choose from: an Individual Seller account (pay-per-sale) or a Professional Seller account (monthly subscription fee with additional features).

  • Individual Seller Account: Suitable for occasional sellers. You’re charged $0.99 per item sold on top of other fees. While it has lower upfront costs, it might not be cost-effective for larger volumes.
  • Professional Seller Account: Ideal for businesses aiming to sell more consistently. It involves a monthly subscription fee ($39.99/month), but no per-item charge.

Step 3. Pick your product categories

Afterward, your next step involves identifying a product for sale on the Amazon platform.

product category for amazon dropshipping

The option varies based on your preference and target market. However, for beginners, we recommend choosing some simple product categories such as housewares, sports & outdoors, patio, and home & garden since they are familiar and easy to approach new customers.

Be aware that Amazon dropshipping policy maintains a list of restricted product categories. It’s crucial to review this list carefully to ensure that the items you intend to sell do not fall under any of the prohibited categories.

Step 4. Connect Amazon to your online business stores

If you’re already using Shopify or other eCommerce platforms, it’s a good idea to establish a link with your Amazon account. This can make it easier to manage orders on both platforms.

Here are the steps for linking a Shopify store to Amazon:

  • Log in to the Shopify store account.
  • Locate the Sales Channel on the left panel and then click on the “+” button found on the left sidebar.
  • Choose “Add channel”.
  • Select “Connect to Amazon”.

For other platforms, just follow the similar steps.

Step 5. Create a product listing

Your products won’t automatically appear on Amazon after integrating an app for dropshipping. You will need to follow one of these main actions:

  • Connect your existing Amazon listings to Shopify using your integration app.
  • Generate an offer for a product that you’re already selling on Amazon.
  • Establish a fresh listing for a new product on Amazon

product listing on amazon

However, in case you are a new member of Amazon dropshipping, you might not have the initial capability to list all your products right away.

Step 6. Sync your inventory

Synchronizing your Shopify inventory with your Amazon sales channel makes your process more smooth and easy to access. It will automatically update your Amazon listings to show what’s available, helping you avoid bad reviews from customers.

Step 7. Start sales and promotion

Final step! There are tons of things you can do to achieve your goals in the first month doing Amazon dropshipping. Coupons, deals of the day, paid advertisements, or email marketing will remind customers of our grateful customer service and high-quality products.

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Conclusion

With the right tips and tools, starting your own Amazon dropshipping business can be a rewarding and lucrative venture.

By focusing on product research, supplier relationships, listing optimization, and customer service, you can position yourself for long-term growth and success in the constantly evolving world of e-commerce.

So, take the leap and pursue your interests while also generating quick profits through this powerful platform!

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