Dropshipping via Amazon is often touted as an ideal business approach for aspiring entrepreneurs looking to launch an eCommerce business without the hassle of inventory management and shipping logistics.
To help you decide if this popular dropshipping model is right for you, we’ve put together this guide that outlines how Amazon dropshipping works in 2024, and the steps to get you started.
How Does Amazon Dropshipping Work?
In the most basic sense, Amazon dropshipping involves listing products on the Amazon platform without actually owning or storing any inventory.
When a customer places an order through your Amazon listing, you purchase the item from a third-party supplier, typically at a wholesale price.
That supplier then ships the product directly to your customer.
Although there are some costs involved in dropshipping, there certainly aren’t many, making it a popular business model for anyone who is looking to start an eCommerce venture with minimal outlay.
6 Steps to Getting Started with Amazon Dropshipping
If you want to have any success with Amazon dropshipping, a structured approach is key.
Here, we’ll break down the process into six pivotal steps essential for launching your Amazon dropshipping business.
1. Familiarize Yourself With Amazon’s Dropshipping Policy.
Although Amazon allows dropshippers to sell on its platform, it does have a strict dropshipping policy with which you’ll need to be familiar before you start.
The most important thing to note is that you must be identified as the Seller of Record. This means that you are fully responsible not only for any sales tax applicable to your items, but also for managing your sales, returns, and all customer communications.
You’ll also need to ensure that packing slips, invoices, and packages only include your business information as the identifiable seller.
2. Choose Your Niche and Products.
Next, it’s time to determine what you can sell on Amazon to make a profit. To increase your chances of success, it’s worth doing your research and analyze product data to find items with the highest potential profit margins.
To do this, start by using AMZScout’s Product Database to analyze key metrics for thousands of products.
In order to do this, first you’ll need to select your preferred product category, then enter a keyword to find relevant products within those categories.
To make this research process more efficient, you can fine-tune your search by using the available filter options.
In the illustration above, you’ll see that we’ve highlighted the three most important filters:
- Estimated sales – A high number of sales is a strong indication that there’s a lot of interest in a certain type of product, making it a good option to add to your inventory.
- Number of sellers – The more sellers there are, the greater your competition, and the more difficult it’s going to be to succeed with your dropshipping business.
- Seller type – Here, it’s important to select “Merchant”. This will show you products that are being sold by dropshippers.
Once you’re done, you’ll be shown products that meet your criteria, along with a wealth of data, including:
- Rank and sub-rank.
- Estimated monthly sales and revenue.
- Net profit for each unit sold.
- Fees for each unit sold.
Along with the number of sales and sellers, these last two points are particularly important. Here, you want to be sure that the sales fees you need to pay don’t eat into so much of your profit that the product isn’t worthwhile selling.
3. Find a Product Supplier.
With a list of profitable product ideas in hand, now it’s time to find a supplier.
To do this, you can use an online directory like AliExpress. Although such platforms are often used by wholesale retailers to buy products in bulk, it’s also possible to find an extensive array of companies willing to work with dropshippers.
Simply search for terms that describe the type of products you want to sell, and compare the results to find your ideal product.
As you do so, remember to select “US” in the “Shipping From” field. Amazon Prime customers are used to swift delivery, and they’re l not going to get that if your product has to make it all the way from China.
While you’re at it, be sure to check out the feedback tab on the store page of any seller with whom you’re thinking of working. After all, the last thing you want is to saddle yourself with an unreliable supplier.
Finally, you need to ensure that your supplier doesn’t include their own company information on any packing slips, invoices, and packaging materials sent with your items. Not only is this against Amazon’s dropshipping policy, it also creates confusion for your customers about whom to contact if they have questions or return requests.
As such, it’s important that your information – and only your information – is sent to the customer.
If AliExpress doesn’t work for you, see our guide to finding dropshipping suppliers for more ideas.
4. Set Up an Amazon Seller Account and Create Your Products.
Next, head to Amazon Seller Central and set up a Professional account. This costs $39.99/month, but provides the opportunity to list more products and use more features than the free Individual seller account.
Once your account is approved, it’s time to add yourself to the existing product listing for your chosen product.
To do this, go to your Seller Central account and click on the “Inventory” tab. Then, click on the “Add a Product” button. On the next page, select the “Sell on an Existing Listing” option.
Then, use the search bar to find the product listing that you want to join. Once you have found the listing, click on the “Sell on This Listing” button.
5. Drive Customers To Your Products.
Existing listings with a high search volume will help you increase the visibility of your product and boost conversion rates. However, this also makes the competition fiercer, as you’ll be competing with other sellers for the same product.
This means that your goal is to win the Buy Box, which is the featured spot on a product listing where customers can add the product to their cart. When a customer clicks on the “Add to Cart” button, the product from the seller who won the Buy Box is added to their cart.
Sellers who win the Buy Box are typically those who offer the lowest price and the fastest shipping, though having a strong, well-established reputation as a seller will also increase your chances of success.
One thing to note is that Amazon doesn’t allow you to promote your dropship products outside of their platform.
This means that while you can use eCommerce SEO best practices on your listing, the goal is to improve its ranking with Amazon’s search results, rather than through a search engine like Google.
Likewise, while Pay-Per-Click (PPC) can be used for boosting sales, you should focus your efforts on Amazon’s own in-house advertising system, rather than an external platform like Google Ads.
6. Manage Your Orders
Assuming your marketing is starting to pay off, you’ll start to see orders coming in. When they do, it’s essential that you handle each one efficiently, placing the order with your supplier as soon as possible to ensure the kind of timely delivery that plays such an important role in customer satisfaction.
Speaking of which, remember that unlike other FBA models, you’re 100% responsible for handling all questions, complaints, and return requests from your customers, so be sure to do this diligently. Respond promptly and work with your customers to correct any issues.
Even the biggest complaints can be transformed into satisfied customers if you work to resolve problems quickly and professionally.
How Amazon Dropshipping Works: A Summary
Amazon dropshipping works by listing products available from third-party suppliers. Although these suppliers ship the products to your customers, you’re ultimately responsible for any problems or complaints, meaning that it’s important to do your due diligence when researching a potential supply partner on a site like AliExpress.
However, before you get to that stage, it’s just as important to research profitable product ideas, using tools like AMZscout to find the kind of items that give you the best chance of generating a good return.
The six steps listed above will help you with both of these critical tasks, as well as setting you on the path to your first sales. From there, check out some of the recommended eCommerce tools that other founders use, so you can start scaling your business and ensure success with dropshipping.