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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 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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14 comments on “Dropshipping on Amazon in 2020

  1. 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.

  2. 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.

  3. 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!

  4. 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.

  5. 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.

  6. 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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