Dropshipping can be a convenient way to make money in ecommerce when you follow best practices and avoid common pitfalls of this fulfillment method. Before you start, check out this guidance on how to dropship successfully in the Amazon store and beyond. We’ll cover:
- What is dropshipping and how does it work?
- Three steps for how to dropship in the Amazon store
- Five tips for dropshipping success
What is dropshipping and how does it work?
Dropshipping is an approach to ecommerce fulfillment where the seller outsources steps like product sourcing, picking and packing orders, and shipping to a dropshipper. A dropshipper is a third party that can handle some or all of these steps in the fulfillment process.
Is dropshipping legal?
Yes, when you follow best practices, applicable laws, and the guidelines of the dropshipper, retailers, and other key players in the dropshipping process.
Every fulfillment option has tradeoffs, but dropshipping comes along with a unique set of considerations in order to dropship legally and avoid other problems. We’ll walk you through some potential drawbacks and cover common mistakes, as well as ways to avoid them. For a more detailed dive into advantages and disadvantages, you can also check out these dropshipping pros and cons.
How profitable is dropshipping?
Dropshipping can be very lucrative. Maintaining healthy margins starts with product selection. Some dropshippers find success by using strategies like keyword research to zero in on low-priced, high-quality goods, which they then resell for a profit at prices that entice customers.
In particular, dropshipping can appeal to beginners because it can be relatively inexpensive to get started, with low startup costs and little overhead. This is because you typically don’t have to purchase or handle inventory upfront. Orders ship from the dropshipper based on real-time demand, so you don’t have to take a gamble on procuring products that might not sell.
Because of this, it can be an easier way to start selling with Amazon and grow your business.
In 2022, more than 60% of sales in the Amazon store came from independent sellers—most of which are small- and medium-sized businesses. The same year, US-based sellers sold more than 4.1 billion products to customers worldwide, averaging more than $230,000 in sales.
Explore more Amazon selling stats
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Is dropshipping allowed in the Amazon store?
Yes, you can use dropshipping in coordination with an Amazon storefront if you follow relevant guidelines. The Amazon dropshipping policy gives details for how to dropship in the Amazon store and keep your selling account in good standing.
Review Amazon’s dropshipping policy
Three steps for how to dropship in the Amazon store
- Set up an Amazon selling account. Your Seller Central account gives you access to tools and dashboards for getting started in ecommerce and growing your brand.
- Find a dropshipping supplier. Be sure to carefully vet any suppliers you work with. In the rest of this post, we’ll cover what to look for in a dropshipper.
- List products, track orders, and grow sales. Create listings for the products you want to sell, or match offers to existing listings in the Amazon store, then make use of Amazon selling resources for growing conversions.
Sign up for an Amazon selling plan to get started
For instance, some sellers use FBA for faster-selling products and dropshipping for slower-moving products, which means they can avoid having to deal with storing that inventory for long periods of time.
Five dropshipping tips for success
1. Make sure you’re the seller of record
To dropship in the Amazon store, you must be the seller of record, meaning you technically own the products before the dropshipping supplier ships them to customers.
Have an agreement with your supplier that they’ll:
- Identify you as the seller on all packing slips, invoices, external packaging, and other information provided in connection with the products.
- Remove any materials identifying a third-party dropshipper.
- Comply with all other terms of your seller agreement and applicable Amazon policies.
If a customer sees packaging, receipts, or other materials identifying a seller that isn’t you or Amazon, it can create confusion, and they might not know who to contact if they have any problems or questions.
2. Select products with care
What are the best products to dropship? In general, some types of products are better suited for dropshipping than others. For instance, you typically don’t have the ability to customize dropshipped products because they ship directly from the supplier. If you want to add a personal touch, such as a thank you note or a special arrangement of units within a box, consider alternatives to dropshipping.
You might also want to avoid perishable goods, or products that require special storage considerations like temperature-controlled environments. Other products like dangerous goods and hazardous materials (hazmat) can also be problematic.
Learn more in this guide to evaluating product ideas
3. Get proof of authorization
Another way to do your due diligence when vetting dropshippers is to ask the dropshipping supplier where they receive products and confirm whether they have letters of authorization from the brands or manufacturers of the products you want to sell. Letters of authorization commonly state something like, “Supplier ABC is authorized to sell products under XYZ brand name.”
You can also:
- Ask to review other forms of purchase documentation such as invoices.
- Check for customer reviews of the dropshipper.
- Conduct other research such as looking for any press coverage or other forms of validating information about the dropshipper.
If a supplier is unable to provide invoices or letters of authorization, don’t take any chances. Seek out a different vendor, instead.
4. Figure out how you’ll handle customer service
When you use dropshipping in the Amazon store, have a gameplan for customer service, including processing any returns or exchanges and issuing refunds. Make sure in your agreement with the dropshipper that they’ll be able to accept, process, and document customer returns in a way that meets or exceeds Amazon policies for returns.
Don’t be discouraged by returns, which are a normal part of ecommerce. Instead, focus on providing excellent customer service in order to earn good reviews. Set up a system for answering any questions and resolving issues customers might have, or make sure the dropshipper offers customer services that are adequate to cover your needs. If necessary, coordinate with the dropshipper to ensure customer service is seamless.
Learn more about customer service in this beginner’s guide
5. Calculate your margins to turn a profit
How much does dropshipping cost? It can vary depending on factors like the types of products you want to sell and the supplier. As you evaluate dropshipping vendors, ask for a complete list of costs and fees in advance so you don’t get caught off guard.
There are no Amazon costs or fees specifically for dropshipping. You can learn more about Amazon’s standard selling fees, and if you choose to use optional Amazon services through a resource like FBA, you might also want to take into account additional expenses related to things like product storage and shipping.
Use sales estimators like the Revenue Calculator to compare margins for your fulfillment method with FBA and other options.
Learn more about ecommerce fulfillment options and costs
● Find profitable product ideas
● Build an online store
● Source products
● Fulfill orders
● Get product reviews
Is dropshipping right for your business?
The way you handle customer order fulfillment is an essential part of starting and building an ecommerce business. We’re here to support your growth with strategies for boosting sales.
For more tips on how to succeed selling online, check out Seller University, a free educational resource with tutorials like this video with guidelines for sourcing products.
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