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Amazon Dropshipping: the Ultimate Guide

By Julija
23 Apr, 2021
11 min read

Amazon dropshipping is a very appealing business model to many merchants, and it’s not surprising why. After all, we live in the Amazon era where 38% of the U.S. online retail sales happen with this e-commerce giant.

However, if you want to create a profitable dropshipping business on this platform, you need to play by Amazon’s rules, which can be pretty strict.

But don’t you worry, in this guide, we have all the information you need to start selling on Amazon.

Let’s get into it!

Is dropshipping allowed on Amazon?

amazon cardbox robot

First of all, let’s get this question out of the way.

In short, yes, dropshipping is allowed on Amazon, BUT.

People at Amazon take excellent care of their customers. They even wrote in their mission statement that they want to become “Earth’s most customer-centric company.” That’s why there are quite a few rules for allowing a third party to fulfill orders to customers on your behalf.

GIF source

As a dropshipper, you must always:

  • Be the seller on record for products.
  • Identify yourself as the seller of your products at every touchpoint with your customers: on invoices, packing slips, external packaging, and other information regarding your products.
  • Remove any information that identifies a third-party dropshipper, such as packing slips, invoices, or external packaging before shipping the order.
  • Be responsible for accepting and processing returns.
  • Comply with the terms of your seller agreement and other Amazon policies that apply to you.

Most importantly, you can’t dropship products from another online retailer and have it ship those products directly to customers. You can only dropship products from wholesalers, such as Alibaba. 

This, ultimately, means that Amazon doesn’t allow AliExpress dropshipping on its marketplace. Doing otherwise will result in your account being suspended on the marketplace.

That being said, you can still make a lot of money on Amazon, you just need to find a legitimate wholesaler. We give you more tips on that later in this guide.

Dropshipping on Amazon vs. regular dropshipping

So, what’s the big difference between dropshipping on Amazon and regular dropshipping business?

From the first look, these two business models are pretty much the same. 

As a regular dropshipper, you sell your products on your own store and never need to handle the inventory or shipping yourself.

With Amazon dropshipping, you also don’t need to take care of the inventory or shipping. The process is pretty much the same. The only difference is that instead of selling products on your own online store, you list them on Amazon.

This is a big difference, though. 

By dropshipping on Amazon, you get access to over 300 million active users who are ready to buy, something that is impossible to achieve on your own online store, no matter how many advertising courses you watch. However, as one wise man once said, “With great power comes great responsibility.” 

Let’s take a look at the possibilities and limits that come with dropshipping on Amazon.

Is Amazon dropshipping profitable?

You have to pay around 15% of your revenue to Amazon. However, you get to dropship on the largest e-commerce platform and get in front of 300 million shoppers. Work on scaling your products, and you’ll be profitable.

Pros and cons of dropshipping on Amazon

Before you start selling on Amazon, make sure you know what you’re getting into first and if the benefits are worth the cons.

Let’s look at the pros first.

  1. Getting in front of millions of shoppers

It’s projected that Amazon will share 50% of the retail e-commerce in the US in 2021, making Amazon the largest online retailer in the US. In 2019, the marketplace made more than $280 billion in sales. Listing your products on Amazon gives you a chance to grab a slice of the pie! The potential traffic is huge compared to what you can get on your own online store.

  1. Super targeted traffic

Amazon offers over 30 categories you can choose for your products, allowing you to reach super-targeted shoppers.

  1. It’s easy to set up

If you’re dropshipping on Amazon, you don’t have to create your own website. There’s no need to find a hosting company or work on any other aspects of maintaining a nice online store. You simply need to create an Amazon listing and put your products online.

  1. No risks (almost)

The Amazon seller account is free – you don’t need to invest any money upfront to register yourself on the marketplace. As it’s usual for the dropshipping business model, you also don’t need to buy inventory up front, so you can start with literally zero investments. The only risk pretty much is to get suspended. We cover how to avoid it later in the guide.

And here are the cons of Amazon dropshipping.

  1. You can’t customize much

Since you’re not on your own website you don’t have much freedom on presenting your products. There are some good practices you can follow, such as including bullet lists in your product descriptions, but, otherwise, user experience is up to Amazon.

  1. Your sales data is exposed

Amazon can see all of your sales data. Even worse, the marketplace has been accused of using the data of its sellers to find great selling opportunities, making it more difficult for smaller businesses to sell their products on Amazon.

  1. You can get suspended any time
stop sign

Amazon is pretty strict about its rules for sellers. For example, if you forget to close your listing when you’re out of stock and make sales in the meantime, you can get banned for it. You can also get suspended if your supplier keeps on sending your products late. The same goes for if your orders are mixed up. The bottom line is – Amazon cares deeply about its customers, so if your game is not top-notch, you’re screwed.

  1. You can’t sell your Amazon dropshipping business

One of the cool things about being a dropshipper is that you can build a successful online store and sell it for some good money. Unfortunately, unless you’re Jeff Bezos, this is not the case for Amazon dropshippers – you simply don’t own the marketplace.

  1. Your margins are very thin

But like very thin. Amazon usually takes around 15% of your revenue. Typical dropshipping margins are generally about 10-30%. So, even if your margins are 30%, you’ll only be making 15% by selling on Amazon. To be profitable, you’ll either have to find a winning product with high margins or scale your sales.

  1. No long-term connections with your customers

Amazon is a place where you register to sell your products, not to build a relationship with your customers. So, if you want to create a brand, your better choice is to do regular dropshipping. But, if making some extra bucks without too much commitment is what you’re looking for, Amazon is perfect for you.

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The alternative: run your own dropshipping store

keys

If you think that Amazon dropshipping cons outweigh the pros, you can always go for selling through your own store. You’ll have much more control over your marketing and user experience, plus you’ll be able to create a loyal customer base. 

You also won’t have to pay third-party fees for making a sale. Finally, you’ll be able to choose from a wide range of dropshipping suppliers and use such cool tools as AliExpress dropshipping center to find the best products for your store.

Amazon dropshipping and Shopify

The partnership between Shopify and Amazon allows you to sell on the giant marketplace through Shopify. You can use Amazon as a sales channel for your dropshipping store. For example, you can link Amazon listings to your Shopify admin and do more things like track your products and sales and sync product details.

How to find a good wholesaler to dropship on Amazon

When you’re selling on Amazon, you can get suspended for multiple reasons, such as late product delivery. Thus, finding a supplier you can count on is the key to your dropshipping success.

man with magnifying glass

Here are the most important questions to ask your wholesaler before you start dropshipping on Amazon:

  1. Do they sell on Amazon?

Make sure your potential wholesalers don’t sell their products on Amazon. If they do, it will be almost impossible to compete with them.

  1. How soon will they ship their orders?

Amazon is pretty strict about shipping rates. Ask your wholesaler about their shipping track record and whether they can guarantee you that your products will be delivered on time. After all, you’ll be the one taking the blame if something goes wrong. 

Also, don’t forget that every Amazon order requires you to provide shipping and tracking information. Make sure to ask your suppliers if they can send you this information electronically.

  1. What is their return policy?

You’ll have to deal with returns, so you need to know how to handle them to keep your Amazon account healthy and avoid losing money.

  1. How often do their products change?

It’s not unusual for wholesalers to revise and upgrade their products. While this is not a bad thing in general, Amazon is very serious about its product listings – your product listings need to match the products shipped to your customers exactly. To avoid penalties, ask if your wholesaler can inform you of the changes each time their products are revised.

  1. Do they use automation for order submissions?

The moment you sell something on Amazon, you need to submit your order data to your wholesaler. As you probably imagine, doing this manually will not cut it for you – this process needs to be automated to keep your seller’s account healthy and you sane. Find out what system your potential suppliers are using for processing orders.

  1. Do they provide information on inventory in real-time?

You need to always be up-to-date on your inventory levels. Otherwise, if you sell out-of-stock items, you risk getting your Amazon account suspended. If your wholesalers can’t give you real-time data on inventory levels, it’s better to look for other suppliers.

  1. Is it easy to get in touch with them?

Make sure your suppliers are easy to contact and will respond to your requests quickly when any issues arise. 

Also, be sure to check our ultimate list of the best dropshipping suppliers!

7 Tips on succeeding with Amazon dropshipping

It’s easy to get into Amazon dropshipping, which means you’ll have a lot of competition. Luckily, we have quite a few tips on how to be successful if you want to sell on Amazon. Since your margins are likely to be low and you have to pay Amazon fees, your main goal should be to scale your sales, i.e., try to sell as many products as possible.

  1. Analyze product trends
we are trending now
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Be ready to do a lot of homework before you put your first listing on Amazon. Check your product ideas on Google Trends – Google knows what people want. You’ll see the relative popularity of your products worldwide or in a particular country. You can also see when people are most interested in specific products. If you don’t have any product ideas yet, go to Amazon Best Sellers to see what’s trending on the marketplace now.

We’ve put together a handy list of the best-selling products online in 2021 to make your research easier, have a look!

  1. Sell different kinds of products

When you’re dropshipping on Amazon, you’re not building a brand. Your goal is to sell as many items as possible when they’re in demand. So, instead of trying to find that one best product, go for testing multiple ideas at once. See which products bring you the most sales and scale on them, e.g., get sponsored product ads to promote your product listings.

  1. Exclude Amazon Prime products

To make your product research quicker, make sure you don’t have to scroll through countless pages with Amazon Prime products – you don’t have a chance to compete with them. Download a Google Chrome extension like Prime Away and save yourself time.

  1. Try to win the Buy Box

The same product is often sold by multiple sellers on Amazon, making the competition very high. For this reason, winning the Amazon Buy Box should be the top priority for dropshippers. More than 80% of sales on Amazon are made through the Buy Box, and the number is even higher with mobile sales. 

The Buy Box is the white box on the right side of a product detail page on Amazon.

amazon ad to basket box

Win it, and you’ll maximize your profit margins.

The lowest price usually wins, so you’ll have to play with your pricing to win the Buy Box.

To have more leverage over other sellers competing over the Buy Box, do your best to find products with the biggest margins, so you could be confident in lowering your prices.

  1. Automate as many things as possible

Imagine you get many orders for a product that’s sold out, and you missed it. On Amazon, you can’t cancel orders yourself – your image as a seller won’t look good, and you’ll be risking a suspension. 

Or, let’s say you took a few days off and came back to Amazon to see you have lots of sales to fulfill. Since the process will take you hours, you’ll be risking your shipping times that can also hurt your metrics and get you suspended.

The point is, no matter how great your excel skills are, with Amazon you can’t afford to lose even a few days. So, if you want to have your weekends to yourself, get software that will help you automate these processes:

  • Repricing: you’ll be able to keep up with fluctuating Amazon prices and have a better chance to win the Buy Box.
  • Purchase order creation: automatically send the order to your dropship supplier.
  • Order tracking: handle your orders on time by automatically providing shipping and tracking information to Amazon. 

There are even more processes you can automate, but these are the main ones to help you dropship successfully.

  1. Obey Amazon rules

Most importantly, avoid getting suspended at all costs, otherwise, your hard work will be lost. You may even not receive the money you earned! Make sure you follow the rules we discussed at the beginning of this guide.

Also, keep your dropshipping business up to the Amazon standards:

  • Your order cancelation rate must be less than 2.5%.
  • Your order defect rate (ODR) must be less than 1%. 

If your ODR is more than 1%, your Amazon seller account will likely be suspended. A product is deemed defective when it gets a chargeback, negative feedback, or an A-to-Z claim. 

The A-to-Z Guarantee is something you have to be especially aware of. It was created to protect customers when they buy products that are fulfilled by third-party sellers. 

For example, customers can make the A-to-Z claim when the item hasn’t arrived three days after the latest estimated delivery date, was damaged, or hasn’t arrived even though the tracking says it did.

  • Your late shipment rate must be less than 4%
  1. Be ready to hustle

No matter what some YouTube gurus may say, don’t treat dropshipping as a get-rich-quick scheme. When did anyone really make millions and millions with barely any effort?

If you really want to succeed with the Amazon dropshipping model, you need to be ready to roll up your sleeves. Invest some time in your product research, look for trusted suppliers, and advertise your listings.

Most importantly, don’t use money as your main driving factor, otherwise you’ll drop dropshipping the moment you face your first obstacle. Look at it as an exciting adventure which can eventually give you financial freedom if you follow your passion, for example, sell the products that relate to your hobby. 

Here’s what NOT to do if you want to dropship on Amazon

wrong way sign

Like we discussed before, one of the key requirements for doing a dropshipping business on Amazon is to dropship from a wholesaler, not from another e-commerce retailer. 

This means you can’t dropship your products from AliExpress to Amazon since AliExpress is an e-commerce retailer.

Plus, since you can’t really customize the products from AliExpress as they’re not wholesalers, dropshipping from AliExpress goes against another Amazon’s rule, too. The rule says that you have to identify yourself as the seller of your products on packing slips, invoices, external packaging, and other information related to your products. 

Also, don’t do dropshipping from Amazon to eBay. It’s an older dropshipping model where you take products from Amazon FBA and sell them at a higher price on eBay. This model is not supported by Amazon and eBay and can get you in trouble with unhappy customers once they realize what you’ve done.

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The takeaways

Due to account suspension risks and almost no possibility to build a lasting relationship with your customers, Amazon dropshipping is not the best choice if you’re interested in building a long-term business model. In this case, we recommend that you start dropshipping with your own store.

However, you can still make a lot of money by dropshipping on Amazon since you get to sell products for a massive audience. You just need to be honest with yourself and decide if you want to build a business that will span for at least a few years or is some side hustling what you’re looking for now.

Plus, don’t forget that you can simply use Amazon as an additional sales channel for your online store and increase your brand’s social proof with positive Amazon reviews.

FAQ

Is dropshipping allowed on Amazon?

Amazon dropshipping is generally acceptable on Amazon, however, you need to follow strict rules not to get your account suspended.

How profitable is Amazon dropshipping?

Amazon dropshipping is a viable dropshipping method. Amazon takes around 15% of your revenue, but you can get in front of over 300 million shoppers ready to buy. Work on scaling your products, and you’ll be profitable.

Does Amazon allow dropshipping from AliExpress?

No. One of the key requirements for doing a dropshipping business on Amazon is to dropship from a wholesaler. AliExpress is an e-commerce retailer, and Amazon doesn’t allow dropshipping from other retailers on its platform. Some merchants attempt to dropship their products from AliExpress to Amazon, but they usually end up getting suspended.

Is Amazon FBA the same as dropshipping?

No, these are two different business models. The essence of dropshipping is not owning any inventory – you simply act as a middleman. Whereas with Amazon’s FBA program, you need to invest in products and store them in Amazon’s warehouse.

Julija

Julija Televičiūtė is a freelance content marketer. Specialized in copywriting, social media, and dog memes, she helps businesses get their message across and create content that sells.