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Dropshipping on Amazon in 2020

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Looking for a way to get started selling on Amazon but don’t want to spend a lot of time or money doing it? Enter: Dropshipping on Amazon!

If you ask an experienced e-commerce seller for a good way to get started selling products online without breaking the bank or spending a ton of time, chances are they’re going to tell you that dropshipping is the way to go.

 

How does dropshipping on Amazon work?

Dropshipping is an e-commerce method in which the seller takes orders on behalf of a manufacturer, distributor, or supplier. Then, when a customer buys the product, the seller uses their supplier to fulfill those sales.

Often, dropshippers reposition the sold goods as their own and the end consumer is never made aware that the goods came directly from the manufacturer. This practice is popular on e-commerce sites like Amazon, Ebay, and Shopify.

And while this may sound somewhat complex, we’ve broken it down for you to help you get a better handle of how it works and how you can start dropshipping in 2020.

Here is a diagram that teaches you the basics of dropshipping on Amazon (explained in further detail below):

  1. First, an Amazon customer (on the left-hand side of the diagram) purchases the product you’ve listed on Amazon. 
  2. Second, once the transaction is finalized and you receive the funds, you purchase the product directly from the supplier (on the right-hand side of the diagram) and give them the customer’s information. 
  3. Lastly, with the buyer’s information in hand, the supplier then sends the product to the customer.

 

Print-on-demand dropshipping

One popular form of dropshipping is through print-on-demand.

Print-on-demand allows you to advertise customized products such as t-shirts, mugs, posters, and even books without purchasing inventory. Then. when the sale is made, the supplier creates the product for you, then ships it. 

Dropshipping on Amazon: Baby Yoda search results on google

For example, when Disney “dropped the ball” on Baby Yoda merchandise in late 2019, many third-party sellers created their own print-on-demand merchandise to fill the void.

 

How does dropshipping compare to other methods of selling on Amazon?

Dropshipping is just one of many methods of starting a business on Amazon. Other popular — and arguably more lucrative — methods of selling products on Amazon include wholesaling and private label.

Wholesaling is when you purchase goods at a bulk rate from a supplier to resell to another retailer or distribute as a retailer yourself, and private label is a method of manufacturing your own products to sell on Amazon. 

However, there are a number of advantages dropshipping on Amazon has over wholesaling and private label.

Low start-up costs

As opposed to other popular e-commerce methods like private label and wholesaling, dropshipping does not require you to own your own inventory. Instead, when you get paid by the consumer on the sale, you simply turn around and use a portion of the proceeds to purchase the product from the supplier and have them ship it to your buyer.

Fast to set up

Because you don’t have to own your own inventory when dropshipping on Amazon, it’s quick and easy to set up. Afterall, you don’t have to wait for your inventory to be manufactured and/or shipped to the fulfillment location. It’s ready to go. All you need is a sale!

Fully automated business

There are a lot of apps and plugins online that allow you to fully automate dropshipping on Amazon. For this reason, you can be (almost) completely hands off with your dropshipping business. 

Amazon allows dropshipping

According to Amazon’s dropshipping policy, dropshipping “is generally acceptable.” Just make sure that you follow Amazon’s specific guidelines for dropshipping.

Note: In order to dropship on Amazon, you must purchase from the supplier or manufacturer. Purchasing from another retailer is strictly prohibited.

Easy to research

Dropshipping on Amazon involves selling pre-existing products from manufacturers. For this reason, you can use tools like Jungle Scout — an all-in-one platform for selling on Amazon — to see how well other sellers of that particular product are performing on Amazon. This gives you an edge when you start your dropshipping e-commerce business.

 

What disadvantages are there to dropshipping on Amazon?

Naturally, as good as dropshipping sounds in terms of its advantages, it does have a few disadvantages to consider.

Competition

Because the barriers-of-entry are so low with dropshipping, competition can be high. In addition, while there is some possibility of differentiation with the products you are selling, there is nothing stopping other Amazon sellers from selling identical products.

As such, price is one of the few levers you have to pull to set yourself apart from others, which can lead to a “race to the bottom.”

Slow delivery times

Often, goods that are dropshipped on Amazon are shipped from the suppliers and manufacturers. And often, those suppliers are overseas.

For that reason, shipping times from overseas suppliers can take up to a few weeks (or sometimes even months!) to reach the end user. 

Lack of quality control

Because items are shipped directly from the manufacturer to the buyer, there is no way for you to control the quality of the product.

When you consider that products may travel 10,000 miles or more to reach their final destination, it’s easy to see how they could get damaged in the process.

 

How to start dropshipping on Amazon

Now that you understand a little more about dropshipping on Amazon and how it works, here’s how you can get set up as a dropshipper.

Step 1 – Set up an Amazon seller account

In order to sell on Amazon, you will need an Amazon seller account. You can get one by going to sellercentral.amazon.com. There, Amazon will offer you two choices for the type of account that you can start with: individual and professional

Step 2 – Find a high-demand/low-competition product

Next, you will need to find a product to sell on Amazon.

You can do this by using a tool like Jungle Scout’s Opportunity Finder to find high-demand/low-competition product opportunities. And while you may have your own metrics to use for finding such products, I recommend starting with the following criteria:

  • 100-300 unit sales per month
  • Set competition to “very low” to “low”
  • Fix the average monthly price from $20-$35
  • Set niche score to 7+

This should give you an excellent number of product opportunities to peruse in all categories.

Also, when starting out, I recommend keeping things simple. Housewares, sports & outdoors, and patio, home, & garden are all great categories for beginners because they tend to be low maintenance.

Step 3 – Check a site like Aliexpress to see if the product is available

Once you have some product ideas, you will need to find a supplier.

The biggest connection to dropshipping products is Aliexpress. It’s a business-to-business website that puts e-commerce entrepreneurs in touch with suppliers who are looking to dropship their goods.

Just type in the search terms for the product that you are interested in selling and, just like Amazon, a variety of products will come up.

Once you click on one, you’re provided with a number of details. In the above example, you can see that the notebook/agenda planner costs $3.22 with free shipping into the US (and shipping is free).

The seller also offers 60-Day Buyer Protection on the product. (Be sure to note the delivery time, however, which is more than a month out!)

Step 4 – Create an Amazon listing

After you have a product idea and a supplier to fulfill that product, you’ll need to create an Amazon product listing.

From your Seller Central account, go to Inventory > Add a product. When the Add a Product screen comes up, click “Create a new product listing.”

First, you will need to choose your product category. Then, once you’ve done that, you’ll have to fill out the information for the listing itself.

When setting a price for your dropshipped product don’t forget to account for Amazon’s fees. If you are a professional seller, you will pay a referral fee of 8-15% depending on the category. Individual sellers pay an additional $1.00 per sale, too.

You can learn more about Amazon’s fees by category on their Selling on Amazon fee schedule.

Finally, as soon as you’re ready, you can publish your listing and start making sales.

 

Five tips for success when dropshipping on Amazon

Still seems pretty simple, right? That’s because it is!

Of course, creating a dropshipping business on Amazon is easy. But succeeding with dropshipping on Amazon takes a little more work.

Regardless, here are five tips to help you succeed with dropshipping.

Tip 1 – Promote your listing

In order to maximize sales, you will need to drive traffic to your product listing. This can be done a number of ways. 

First, you have Amazon’s internal sponsorship program, Amazon Pay-Per-Click (PPC). With PPC, you create advertisements for your products that make your product appear higher in Amazon’s search results for keywords that you set.

Next, you can drive traffic to your Amazon product listing through external methods such as social media, blogging, email marketing, etc. While this method is a little more difficult to get going if you don’t already have a following for your brand, it can help you differentiate your product from your competitors.

Tip 2 – Focus on the customer

When you perform dropshipping on Amazon, you’re taking a lot of the hard parts of being an entrepreneur off the table. You don’t have to manufacture your product, nor do you have to ship it. All you have to do is make sure that the customer receives it and they are happy.

So, whereas you would normally spend your time running your business, with dropshipping you can invest your hours into customer service.

Plus, great customer service helps you get good product reviews. And good product reviews can make or break your products on Amazon.

Tip 3 – Focus on your brand

As I stated above, dropshipping’s chief disadvantage is that you will be selling a product over which you will have no final say in its development or design. In addition, other sellers will have access to the same supplier.

This leaves you with very little competitive advantage. Therefore, it’s important that you focus on the brand.

But even if your product is identical to your competitor, that doesn’t mean it has to be the “same.” For example, the brand YETI sells 40 oz stainless steel tumblers for $40 each. Meanwhile, their competitor, RTIC sells the same stainless steel tumblers for less than $20. Yet, somehow, YETI still dominates in that product category.

The reason is simple: people want to buy the YETI brand and the image it purveys.

Tip 4 – Get samples

Before you list your product, make sure you know what you’re selling. Bite the bullet and order a unit in advance. And if you can do it without the supplier knowing that you’re a potential dropshipper, even better.

Once the sample arrives, inspect it. How did it look when it arrived? How long did it take? Were the products as described?

All of these little details will help you predict how your customers will receive the product once you start dropshipping on Amazon.

Tip 5 – Cast a wide net

Because you have no start-up costs with dropshipping, it’s a lot easier for you to cast a wide net. In other words, you can list numerous products at the same time.

Some will fail. Others will succeed. Simply double down on what works and cut the rest.

As long as you follow Amazon’s rules, this approach is totally fine. Just make sure you stay organized and that you continue to focus on Tips #2 and #3.

 

Are you ready to start dropshipping on Amazon?

Hopefully, this article has gotten you excited to either start your first Amazon business, or to add to an existing one. But, if you need more motivation, check out our State of the Amazon Seller report; it’s full of helpful insights. 

If you have additional questions or comments regarding dropshipping on Amazon, let us know down in the comments.

Happy selling!

 

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50 comments on “Dropshipping on Amazon in 2020

  1. I don’t know whether it’s just me or if perhaps everyone else encountering issues with your site.

    It appears like some of the text within your posts are running off the screen. Can someone else please provide feedback and let me know if this is happening to them too?

    This might be a issue with my web browser because I’ve had this happen previously.

    Thanks

    1. Hi Elise! Thanks for letting us know about the issue you’re having. I looked into it and, while I’m unsure if others are experiencing the same problem with the text, I haven’t been able to replicate the runoff on my own computer.

      However, in case it is a problem with our website, rather than an issue with your web browser, will you please reach out to [email protected] with additional info about the run-off text when you have a moment (eg. other blog posts with the same runoff)? That way we can dig into this further.

      Thanks, Elise. 🙂

  2. This is a great article and very helpful. Also If I may add, you need to know your target audience. You can either go for a general store or a niche store. To land on a good online niche, you need to identify a few things:

    Passionate audience
    Others are making money
    Targeting on Facebook
    Perceived value
    Difficult to find elsewhere
    Upward trending

    Passionate Audience

    You need an audience who are highly connected to the products you will be trying to sell. Why? Because if people aren’t passionate about the niche you’re selling, they won’t click the ads presented to them. And facebook & Instagram ads are the main source of traffic for most of the shopify stores. So, try to think of some products related golf, yoga, fitness, bird watching, army etc.

    Others are making money

    How do you know if other people are making money in a particular niche? Well… you kinda tell yourself if you look around carefully. There are some evergreen niches that always makes money. For example, the makeup niche, the sock niche. People are always going to need those items. If you can differentiate yourself a bit, there’s a lot of money to be made.

    Targeting on Facebook

    Facebook targeting is incredibly important for a Shopify niche to be good. Because targeting via Facebook is the easiest and shortest way to generate traffic for your store. You need to pick up a niche that you can easily target on Facebook. Many people tend to ignore this marketing trick and focus on the product innovation/uniqueness first. But if you can’t find the people who may buy your products, no matter how good your products are, all your effort is likely to go in vain.

    Perceived Value

    Most of the customers are unaware of the cost factors associated with a product. So, they typically ascribe an assumed value for the product based on how much they want or need the product. You should pick up a niche that has high perceived value but you can purchase the product at a low price.

    For example, earrings for the ladies. They typically appear to have high perceived value based on their design and beauty, but in reality, most of them come at a very low price.

    Difficult to find elsewhere

    If people can get the products ‘easily’ that you’re going to sell, you should think twice about selling them. By easily, I mean, the product shouldn’t be available in nearby Walmart or any other departmental store. You may not be able to beat Amazon in such a case, but that’s okay! Though Amazon sells everything, people buy from other online shops too!

    Upward trending

    Select something that is trending upwards. You can use google trends or the research feature within Importify’s dashboard to check on your probable merchandise from Shopify stores within your prospect niche… If you can choose a niche while it is going upward, you’re like to make the most profit out of it.

    I hope this helps

  3. This is great info. Thank you for sharing.

    Have a quick question.

    I have a few low competitive products in mind across different categories. If I wanted to sell multiple products on Amazon FBA, would I need separate website domains, landing page to do it? Or can I just list a few products by my seller account individual or business name?

    Appreciate your time.

    1. When it comes to selling multiple products across different categories, Teri, you don’t need separate website domains for each item; you just need one. Also, you can simply add them to your current seller account, under your business name. 🙂 Hope this answers your questions!

  4. Hi
    I’ve been using Jungle Scout to research products for drop shipping on Amazon and I’ve read the article ‘https://www.junglescout.com/blog/dropshipping-on-amazon/’
    but how would I be able to link my orders with AliExpress.
    Is there a way to automate this?

    Thanks

    Andrew

    1. Hi Varun,

      Good question. However, we are not Amazon seller support. You can, however, reach out to Customer Success team and they can help with any questions that you might have.

  5. So I am new and was wondering if there are any programs that will just send the money to the aliexpress site put in the adress and all and then send the profit over into an account.

  6. Your answer (for me to start the fulfillment process with my supplier after the transaction is credited to my amazon account but before I receive the actual funds from Amazon) makes a lot of sense–speeds up delivery and helps customer reviews.

    This will probably sound like a dumb question, I obviously need to buy a course somewhere or something, but how do I pay the supplier? Do I call them with a Credit Card, Debit Check Card…is their other options on how this paying the supplier process is done?

    Thanks in advance, Dave.

    1. John,

      I think it depends on the supplier and where you source them. I’m preeetttty sure that AliExpress uses ACH transfers and possibly PayPal and Stripe, but you’ll have to doublecheck. They probably want you to use AliPay (it’s like China’s paypal) which usually isn’t a bad option since the fees tend to be pretty low. TLDR It’s run by Alibaba, so they tend to require you wire up a bank to it, at least on their normal B2B site.

      I do dropshipping in my business, but mostly print-on-demand stuff like books and t-shirts through Amazon KDP, Redbubble, and Printful. POD is more or less dropshipping, too. Just more customizable.

  7. Hello Mr. Hamrick

    thank you for your knowledge sharing. i learn a lot.
    My name is Jie Sun, i am new dropshipper on Amazon US. i have a supplier which doesn’t offer ‘return label’ if the cumstomer return non-reasonable.
    I am not so clear about return set up in the seller central. Amazon ask seller to provide return label, could i ask cumsotmers who return non-reasonable deal with shipping by themself?
    If not, for the return mailing label, should i select ‘I will provide a pre-paid mailing label for this requrst’? , or ‘I would like Amazon to provide an un-paid mailing label’. in fact i don;t have an idea what’s this option meaning?
    The second question is about return address. The supplier has 3-4 warehouse address. Therefore, how do i add my return address? It seems only one address is acceptable. Is it changeable due to different return cases?
    The last question is shipping time. I locate in China, but the warehouse is in US. My defult send address is China, then i see the defult shipping time is 14-28 days and it is unchangeable. One potenial soulation might be change defult address to USA address. But does it safety to account? Do you have a better to fix shipping time?

    Sorry, so many question might is very boring and long. Anyway, look forward your feedback and hints.
    Thank you in advance!

    1. Hi Jie,

      Great questions all around, but unfortunately, many of these questions sound subjective to the supplier. I recommend contacting them directly to see if they can answer your questions for you.

  8. Great article, thanks! Total newbie here, I am just learning about drop shipping, I love the idea of it. I do understand I will setup a store on Amazon. I do have one question though:

    (When someone buys a listed product of mine.) Do I wait to get the money from Amazon (which I understand is deposited every two weeks if you have sales) and then, only after i receive money from Amazon, pay my American supplier to ship the ordered product?

    1. Hey John,

      Good questions. Ideally, you probably want to start the fulfillment process after the transaction is credited to your account but before you receive the actual funds from Amazon. If you wait two weeks or longer and THEN ship the goods after that, it might take too long for the product to get to the customers which could hurt your seller feedback rating.

  9. Question! How would you find the product number/code on AliExpress for the products? Can you bypass this step when creating your listing on Amazon?

  10. Can i he a seller with a dropsuipper if u arw nor based in the USA but want to focus primarily on sellimgvto the USA market and how long does it when an older is made by a customer and immediately paid for before I fetvtoir share offer profit paid over to to u via Amazon?
    I’m new to this so I am looking at the best options as my capital is limited to start up so inner a way or direction ad too how to receive tour profit and payment in the quickest time once ordered by the customer . I want to have no direct involvement with the customer and only work on the products line and listings and focus on quick turnover sales but try not to initially be involved in returns of items. ? Where and how do I go about it and does Amazon charge a joining fee to become a seller? Also o want only sell in the USA market so I have nothing to with returns and shipping. What are my options.

  11. Hey Dave,

    A few quick questions regarding this dropshipping process as I am new to this.
    1) What address should I put when making my Amazon seller account?
    2) When the customer buys a product from me on Amazon and when I purchase the item off of AliExpress, do I put in the customer’s information for their shipping address and name, is that how it works?
    3) Also, how will returns work? If the customer decides to return the item, you’ve stated that it ships back to me. However, I thought through dropshipping, the initial transportation of the package is from the manufacturer to the customer. So how is that the customer is able to send it back to me, instead of the manufacturer?

    1. Hi Justin,

      1) I recommend using your real address. Sometimes sellers have trouble using different addresses.
      2) Yes, that’s exactly how it works! 🙂
      3) It depends on the company that you’re dropshipping from. When you first arrange to have a product dropshipped, speak with the manufacturer on their policies.

  12. Hi,
    I started selling products on Amazon as a non-resident individual and due to lack of knowledge, I listed a branded product and the result was the blocking of my account.
    After contacting sales support, I was successful in re-establishing my account, however I list nothing more.
    My question is about dropshipping, more specifically, regarding the legality of this modality.
    I am very interested in using jungle scout and I am looking for an accountant with legal knowledge to structure the business.

    1. Hey Ricardo,

      If it’s coming from the manufacturer, in theory, you should be good to list it. Before listing a product, make sure that you speak with the manufacturer regarding IP rights, etc. You may need to have an invoice from them to prove that you are a registered seller.

  13. Hi,
    You probably know that dropshipping, or allowing a third party to fulfil orders is approved by Amazon as long as you comply with their requirements.

    You must:

    Be the seller of record of your products;
    Identify yourself as the seller of your products on all packing slips and other information included or provided in connection with them;
    Be responsible for accepting and processing customer returns of your products; and
    Comply with all other terms of your seller agreement and applicable Amazon policies.

    Will you please tell how you arrange to meet the above requirements if your dropship supplier wants to send the products directly to your buyer?

    Thank you

    Mani

    1. Hi Mani,

      Good question.

      To be the seller, all you have to do is sell it through your account. Your supplier should include your name on the packing slip. And if returns are requested, you have to process them (even if that means you send the products back to you and then you send them back to the supplier).

      I hope that’s helpful!

  14. Dave, this is a fantastic article. I am just wondering if the Corona Virus in China isn’t a major risk for drop-shipping at the moment. I have found these alternate US / European suppliers https://bit.ly/38O02CZ . Do you have experience dropshipping with US / Europe suppliers?

    1. Hey Florian,

      Good question and concern. No, I wouldn’t worry about the coronavirus slowing things down too badly. We’ve been keeping an eye on it, and so far, the only change has been a small extension to the Chinese New Year, but by no more than 1-2 days.

      As far as US/Europe suppliers, it depends. For the books I write which I create through print-on-demand services at Amazon, I have no issues at all. But like anything, just make sure the price is right.

    1. Felix,

      Excellent question. My recommendation would be to only use Facebook for the ads as sharing links even on business pages don’t get nearly as many impressions. A better option is a visual platform like Instagram where it’s easier to get impressions for people that aren’t your followers.

  15. Most amazon buyers – myself included – are addicted to free & fast Prime shipping, and won’t buy anything not Prime, even when it’s a pricier option (or we just won’t buy it).
    Drop shipping from AliExpress is the polar opposite of Prime. I used to do it on eBay. Shipping times can be a month or more, and AliExpress sellers can be extremely unreliable. I know from personal experience
    How do you suggest navigating these issues? I found them not worth it and decided to focus on inventory-based (pre-purchased wholesale) FBA of existing branded products.
    Thanks
    Max

    1. Hey Max,

      Good question. Mostly, it depends on the product. The successful dropshippers I’ve met tend to have higher-priced items, often to the tune of a few hundred or thousand dollars. Therefore, they expect it to take a little longer. I personally use print-on-demand services for a lot of what I do these days as they’re usually located here in the US or Canada and have faster turn around times.

      TLDR select products that people don’t mind waiting for. No, they probably won’t wait two weeks for a cell phone case. But will they wait two weeks for a factory grade 3d printer? Probably.

  16. Hey guys, have you heard about the kibocode program? I’ve read about it and it’s going to be huge and completely change the dropshipping and ecommerce game, at least many dropshippers say that. They are launching it officially on 28th this month and having 4 free live webinars.

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