image alt

How To Start a Dropshipping Business On Amazon (2023)

How To Start a Dropshipping Business On Amazon (2023)

Amazon, as a leading global retailer, offers an expansive platform for both seasoned and emerging dropshippers.

And today, I am going to show you how to start and build a successful dropshipping business on Amazon.

Let’s dive in.

How Dropshipping on Amazon Works

Dropshipping bridges the gap between entrepreneurs (retailers, wholesalers, or manufacturers) and customers.

The dropshipper acts as an intermediary, showcasing products through an online store or website. Upon receiving a customer order, the dropshipper coordinates with the manufacturer for fulfillment.

The dropshipper typically informs customers about delivery timelines.

Although the manufacturer may sometimes handle shipping, on Amazon, this responsibility often falls to the dropshipper.

Profitability hinges on the margin between wholesale purchase and retail sale prices.

Dropshippers on Amazon also remit approximately 15% of their profits to the platform and that is why sellers must strategically pick their products to ensure the profit margin will result in a reasonable take home.

Additionally, Amazon mandates subscription to seller plans: the Individual plan, suited for beginners, and the Professional plan, for more experienced sellers.

The Individual plan incurs a $0.99 per-sale fee, while the Professional plan requires a fixed monthly payment of $39.99 irrespective of sales made.

Despite the associated fees and guidelines, Amazon experienced a remarkable <a href="https://sell.amazon.com/blog/grow-your-business/amazon-stats-growth-and-sales">45% increase in seller numbers in 2020 alone.</a>

This is a good indication of how profitable being a seller is, so long as the right amount of work is put into it.&nbsp;

Rules For Dropshipping on Amazon&nbsp;

Amazon enforces stringent seller policies to protect all stakeholders: consumers, dropshippers, manufacturers, and the platform itself.

Non-compliance can result in account suspension.

<b>1.&nbsp;Complete Registration Accurately</b>

Sellers must provide accurate personal and business information during registration. Misrepresentation is considered fraudulent.

<b>2.&nbsp;Fulfill Service Fee Obligations</b>

Sellers must provide valid credit card details for payment processing.

This will come in handy for issues like chargebacks, claims, disputes and miscommunications relating to payments. All deductions and payments will only be made from and made to the account details provided.

Sellers are also required to ensure that the laws of their country of residence support their financial interactions with Amazon.

<b>3.&nbsp;Adhere to Amazon's Agreement</b>

Violating Amazon's service agreement can lead to account suspension.

Hence, sellers are advised to take their time to read and understand <a href="https://sellercentral.amazon.com/help/hub/reference/external/1791?ref=su_1791_cont_G201808410&amp;locale=en-US">these rules</a> so they can avoid breaking them.

Sellers must ensure fairness and transparency in their dealings with consumers as well as their dropship suppliers.

<b>4.&nbsp;Maintain Optimal Account Ratings</b>

Seller ratings, influenced by customer reviews and shipping performance, must not fall below <a href="https://sellercentral.amazon.com/help/hub/reference/external/G200205250">Amazon’s set standards.</a>

The account ratings are an accumulation of reviews by consumers, the rate of the delayed shipment as well as other factors relating to consumer satisfaction.

<b>5.&nbsp;Ensure Product Quality</b>

All orders shipped to consumers must be properly screened and checked to ensure that they are not delivered with defects.

A defect rate above 1% in shipped orders could jeopardize the seller's account.

<b>6.&nbsp;Manage Order Cancellation Rates</b>

The order cancellation rate has to do with the number of orders placed by the drop shipper on behalf of the consumer that had to be cancelled.

This happens when the drop shipper fails to confirm the availability of the product before taking the order.

Order cancellations should remain below 2.5% to avoid account issues.

<b>7.&nbsp;Establish Seller Identification </b>

The dropshipper must always be the 'seller of record' and handle shipping responsibilities.

The name that appears on all invoices, packing slips, sales tax and seller information must be that of the dropshipper.

This is to prevent confusion on the part of the consumer when a problem occurs relating to product type or product condition.

The consumer can easily contact the drop shipper or Amazon if there is a problem so it can be solved.

Pros and Cons Of Dropshipping On Amazon&nbsp;

This business model, though with lots of advantages, is not without disadvantages.

When making your decision, it is important to be aware of all that you may have to deal with so you have the right approach and mindset before starting your dropshipping business.&nbsp;

Pros of Dropshipping on Amazon&nbsp;

  • No need for inventory creation as you do not need to manage storage and purchase products before sales.&nbsp;
  • It is easy to grow and expand your business as there are fewer things to worry about and the market is easy to study.
  • You do not have to face the hurdles of a wholesaler or retailer so things like ordering, stocking, storing and shipping are off your plate.&nbsp;
  • Offers a broad selection of manufacturers/dropship suppliers and products.&nbsp;
  • Amazon serves a huge audience so you will have access to Amazon's extensive customer base.

Cons of Dropshipping on Amazon&nbsp;

  • Amazon takes a 10-15% cut on all sales you make.&nbsp;
  • You have to subscribe to either an individual plan or a professional plan and this means extra fees.&nbsp;
  • Marketing and advertising are restricted to the rules laid down by Amazon.&nbsp;
  • The buyers/customers belong to Amazon&nbsp;
  • There is great competition among sellers since there are lots of sellers and many are selling the same product.&nbsp;
  • You have little to no access to control the quality of the product delivered to the buyer.

Step-By-Step Guide To Start Dropshipping On Amazon

You can follow the quick guide below to launch your dropshipping business on amazon.&nbsp;

  1. Register as an Amazon seller by creating an <a href="https://sellercentral.amazon.com/">Amazon Seller Central Account.</a>
  2. Research and select products you wish to sell. You can try either low-competition products with few sellers or high-demand products. You can utilize <a href="https://www.helium10.com/tools/product-research/">Helium</a> for market insights.
  3. <a href="https://sell.amazon.com/blog/getting-started/how-to-find-wholesalers">Identify suppliers</a> that you can work with.
  4. Create and publish product listings through the Amazon Seller Central account. Simply click on the "inventory" bar then slide down to the "add product" bar and click on it. Select the "create new product listing" bar and fill in the information in the spaces provided. Then, publish and your product will be live.
  5. Develop and implement a marketing strategy, leveraging social media and blogs, and optimizing product descriptions.

Tips for Success in Dropshipping on Amazon

  • Get your pricing right. Most newbie sellers get carried away by the price competition. Instead of offering the product at a very low price, try offering discounts at intervals instead.&nbsp;
  • Research properly. Pick products with good sales potential. Understand what your competitors are already offering and try to leverage their shortcomings. This would require a good understanding of the market.&nbsp;
  • Find a niche to focus on. This makes selling easier as you can maintain the same sales strategy for all your products.&nbsp;
  • Capitalize on seasonal trends and demands.

Conclusion&nbsp;

Dropshipping on Amazon is a potentially rewarding venture that demands significant commitment and strategic planning. Adherence to Amazon's rules, coupled with strong supplier relationships, are key to achieving success in this dynamic marketplace.

Thanks for reading ❤

What do you think?

0 comments on this post:

Are you ready to transform your Shopify store & soar to success?