Amazon dropshipping is a sales channel that can yield big returns for entrepreneurs. But how exactly does Amazon dropshipping work, and how can you make it profitable for your ecommerce business?
Ahead, learn how to dropship profitably on Amazon, and discover top dropshipping tools to help you start selling today.
Table of contents
- What is Amazon dropshipping?
- How much does it cost to dropship on Amazon?
- Is Amazon dropshipping profitable?
- Pros and cons of Amazon dropshipping
- How to start dropshipping on Amazon in 6 steps
- How to choose a dropshipping supplier
- Top Amazon dropshipping software
- Run a dropshipping business with your online store
What is Amazon dropshipping?
Amazon dropshipping is a business model where sellers list products on Amazon without holding inventory. When a sale is made, the seller purchases the item from a third-party supplier who ships it directly to the customer.
Does Amazon allow dropshipping?
Yes, Amazon lets you dropship on its marketplace—as long as you follow these rules:
- You must be the sole seller of record for products.
- Your business must appear as the seller on packing slips, invoices, and other information in connection with products.
- All information identifying the third-party seller must be removed before shipping the order to customers, to avoid confusion.
- You must be responsible for accepting and processing returns.
- You must follow all terms of your seller agreement and Amazon and dropshipping policies.
💡 Read more about Amazon’s dropshipping policy.
How much does it cost to dropship on Amazon?
Amazon dropshipping fees vary by product type but are usually between 8% and 15%. If you’re working with small margins when dropshipping Amazon products, this could eat into your profits.
You’ll also have to choose a selling plan. Amazon’s Individual plan costs 99¢ per unit sold, while the Professional plan costs $39.99 per month, no matter how many products you sell.
💡 Read more about Amazon seller fees.
Is Amazon dropshipping profitable?
Amazon dropshipping can be profitable. The average dropshipping margin is between 10% and 30% (but Amazon will take referral fees on sales).
That means if your margins are around 30%, you will have a new margin of 15% to 20% after selling a product via Amazon store dropshipping. These margins can be higher if you win the Amazon Buy Box, but that’s a highly competitive process and shouldn’t be something you rely on.
Pros and cons of Amazon dropshipping
Pros of Amazon dropshipping
The advantages of selling on Amazon are similar to the benefits of other large online marketplaces. Here are four benefits of dropshipping with Amazon:
1. Vetted Amazon dropshipping suppliers
Amazon buys products in bulk, mostly from European suppliers. Those products are held in Amazon’s warehouses until they’re ready to ship. Thanks to these basic quality commitments, new sellers can promote decent products at scale to an international audience.
2. Zero warehouse cost
Amazon also has its own fulfillment centers, known as Fulfillment by Amazon. Using FBA lets you complement your Amazon dropshipping products with items of your own, without having to deal with packing, shipping, or warehousing.
3. More discoverability
Amazon gives you immediate access to a large potential audience and has more than 30 product categories to choose from. You can sell in as many different dropshipping niches as you want, which means you can reach highly targeted markets.
4. No need for external marketing or SEO
While you may want to promote your items on Amazon, you don’t need to worry about driving traffic to your product line with expensive external marketing or SEO campaigns.
Cons of Amazon and dropshipping
Like any dropshipping model, the pros of convenience and low startup costs need to be weighed against disadvantages, such as reduced control over products and potential customer service difficulties. Here are four disadvantages of Amazon dropshipping:
1. Exposure of sales data
A condition of using Amazon’s platform is that the company can see all of your sales data, from bestselling items to overall sales figures. Historically, Amazon has been accused of using this data to optimize sales opportunities and strengthen its own involvement in the niche, ultimately pushing out other merchants selling through its marketplace.
2. Fewer connections with customers
You may struggle to grow long-term relationships with your customers when dropshipping through Amazon. By design, Amazon is geared toward helping providers sell products over building brand loyalty. Be prepared for limitations on how you brand your business, display your products, and communicate with customers.
3. No customization
Amazon is largely restrictive when it comes to customization. Everything you do in terms of branding, user interface and experience, and marketing is under Amazon’s control.
4. Upfront investment
To meet Amazon’s fulfillment requirements, you’ll want to have products from the supplier in your inventory. This means you’ll need to invest money upfront in order to start dropshipping on Amazon.
How to start dropshipping on Amazon in 6 steps
1. Sign up for an Amazon seller account
- Business email address
- Internationally chargeable credit card
- Government ID
- Tax information
- Phone number
- Bank account for receiving sales
2. Get approved in your product category (if necessary)
Amazon requires sellers to get approval for certain product types. Collectibles, music, and watches are popular categories that require approval before setting up your Amazon store. Read the overview of product categories you can sell in.
Note that certain products may require approval, even when their category doesn’t. To see if an individual product needs approval, search this list and click Show Limitations.
3. Log into your Shopify store
If you don’t have a Shopify store, sign up to start Amazon dropshipping through Shopify.
Start your free trial of Shopify—no credit card required!
4. Connect your Amazon account to Shopify
Once you’ve created an Amazon account and requested any necessary approvals, connect your Amazon store to Shopify using an Amazon integration app from the Shopify App Store.
Amazon integration apps bridge Amazon and Shopify. Using an app, you can automate order fulfillment, give your customers up-to-date tracking information, and sync product inventory.
Here are a some Amazon fulfillment apps you might use:
- Amazon by CedCommerce
- Amazon Importer Spreadr
- FBA Shipping by ByteStand
- Amazon Integration Plus by Common-Services
Once you’ve selected and installed your app, you’ll be able to create listings for your products and manage your sales across both platforms.
5. Create an Amazon product listing
Your dropshipping products don’t automatically list on Amazon after you add an integration app. To manage your Amazon dropshipping listings with Shopify, you have three options:
- Link Shopify to your current Amazon listings using your integration app.
- Link an existing Amazon listing to your product.
- Create a new listing for a new product on Amazon.
💡 Good to know: If you’re new to Amazon and dropshipping, you may not be able to list a large number of products right away. Amazon limits the number of new ASINs you can create each week until you sell more on the platform.
6. Promote your products on Amazon
While options for marketing your products and brands on the Amazon marketplace are restricted, there are several ways to promote products on the platform.
Run Sponsored Product ads
If you have a marketing budget, consider spending on Sponsored Product ads. Amazon’s ad program operates on a cost-per-click (CPC) model that will position your products more favorably in search results.
Optimize your listings
With all Amazon product pages sharing the same layout, features like product titles, images, and “About This Item” bullet points need careful thought and planning. Remember that your customers will skim your pages and compare them with similar products.
Use social media
There are no restrictions to promoting Amazon links on most social media platforms. That means you can create Instagram Reels to show off your product, or make a carousel ad for Facebook.
💡 Find other ways to promote your Amazon listings.
How to choose a dropshipping supplier
Your main competitive edge over other Amazon dropshippers will be price, and—beyond cutting your profit margins where possible—the best way to outcompete sellers in your niche is to partner with the right dropshipping supplier. Here’s what to look for in a supplier:
- The supplier offers Amazon dropshipping for sellers in your location.
- It produces a range of products in your niche of comparable or superior quality to competitors.
- No customer service red flags or regular poor reviews.
- Low per-order fees that won’t eat into your profit margin.
- Other successful dropshippers use the supplier.
- The supplier can compete with average shipping times in your niche.
- It offers live customer support for dropshippers.
- It has detailed dropshipping dashboards with information on sales and average order values.
Thanks to the popularity of dropshipping in recent years, there’s been an increase in fake or malicious dropshipping supplier services. Avoid wholesalers who charge monthly fees or pre-order fees, and those who also sell to the public.
💡 Read the Ultimate Guide to Dropshipping for Beginners.
Top Amazon dropshipping software
The tools in this list are designed to help you get started with Amazon dropshipping:
This software checks search volume and data for product keywords.
Price: Paid plans start at $35 per month.
This real-time Amazon repricing software suggests repricing strategies to win the Buy Box and increase sales.
Price: You can use the trial version for free. Paid plans are 1% of your gross monthly sales with a minimum fee of $50 per month and a maximum of $2.
FeedCheck monitors customer reviews to help you respond promptly across Amazon and other sales channels. Plus, it lets you monitor competitors’ product reviews and questions so you can analyze and improve your own product descriptions.
Price: Starts at $129 per month.
Sellter Tools helps automate your Amazon dropshipping store. It includes a keyword manager, PPC management tool, and product research tools.
Price: Starts at $37 per month for the Chrome extension.
Running a dropshipping business with your online store
The alternative to dropshipping Amazon products through third-party marketplaces is to start your own online store to list and promote your products.
Using your own store may be a more successful dropshipping business model in the long term, as it gives you more control over your customer service and flexibility over marketing and branding.
Pros of dropshipping with your online store
When you build your own online store, you get to create a shopping environment that’s conducive to selling your products. You can customize the look and layout—and create custom product pages optimized to suit your customers and niche.
With store builders like Shopify, there’s no barrier to designing and running your own store. And once your site is up and running, it’s simple to add extra features that increase your conversion rate.
Within a day, it’s possible to create a store, brand it, add your products, and connect a payment gateway to make your first sale.
Selling on Amazon and other marketplaces via mobile can be a pain. If you choose to build your online store with a hosted ecommerce platform your site will be responsive, which means it will adapt to different devices and screen sizes.
💡 Did you know? Shopify also lets you manage your entire business from your mobile device.
No third-party fees
With your own store, you won't have to pay Amazon’s referral fees, which will significantly improve your profit margins.
Building a real business
By creating an independent store, you’re building a long-term business with a distinctive feel. That makes it possible to pursue repeat business and a loyal set of customers who will tell others about your website.
More shipping and supplier options
When you run a dropshipping business on your own site, you can build relationships with different wholesalers, like AliExpress and AliBaba. Overseas suppliers can compete with local manufacturers by using ePacket shipping to get your products to customers faster.
Cons of dropshipping with your online store
No free traffic
With your own site, you’ll be responsible for generating traffic through marketing, social media, SEO, and paid advertising.
Grow your dropshipping business today with Shopify
Amazon dropshipping can be a great way to increase sales for your business, whether you’re established or just starting out. If you choose to include this dropshipping method in your Shopify store, there are many tools ready to help you with dropshipping fulfillment, sourcing, pricing, and marketing—be sure to also check out some top dropshipping tips.
Amazon dropshipping FAQ
Is Amazon dropshipping profitable?
Yes, dropshipping can be a profitable business model. Many entrepreneurs make good money from dropshipping on Amazon. However, it is important to remember that dropshipping is a competitive industry, and success will depend on how well you can identify a profitable niche, source good products, and market your business.
How much money do I need to start dropshipping on Amazon?
The amount of money you need to start dropshipping on Amazon will depend on the type of product you are selling and the services you are using. Generally, you will need to purchase inventory and pay for shipping and related fees, as well as any fees associated with the Amazon seller account. Additionally, you may need to purchase marketing services or advertising to increase sales.
How do Amazon dropshippers make money?
Dropshippers make money by selling products sourced from Amazon. They purchase products from Amazon at wholesale prices, list them for sale on their own website or a third-party marketplace like eBay, and keep the difference between the purchase price and the sale price as profit. They may also offer additional services such as shipping and customer service to increase their revenue.
Is Amazon FBA dropshipping worth it?
It depends on your specific goals. Some people find Amazon FBA dropshipping to be a successful business model that allows them to start and grow their own business without a large overhead cost. Others may find that the costs associated with using Amazon FBA outweigh the benefits. Ultimately, it is up to you to decide if Amazon FBA dropshipping is worth it for your business.