Are you looking for a way to start an online business? If so, you may be wondering if you can do dropshipping on Amazon.
As per statistics, Amazon has over 300 million active users and more than $280 billion in sales from its sales channel.
Sounds encouraging, right?
But have you also thought about this:
- Can you do dropshipping on Amazon?
- Is it recommended to start dropshipping on Amazon in 2024?
- Is dropshipping legal on Amazon?
This guide will walk you through the dos and don'ts of dropshipping on Amazon, Amazon's dropshipping policy, how to avoid account suspensions, and much more.
Let's start!
What is Amazon dropshipping?
You might have an idea about Amazon and what dropshipping is. But what about Amazon dropshipping?
Amazon dropshipping is a business model where you list your products on Amazon and sell them to earn revenue without owning inventory.
Your supplier is responsible for maintaining and shipping the inventory to your customers on time. Your job is to create an excellent product listing on Amazon.
In short, Amazon dropshipping works in the same way as dropshipping through a Shopify store. However, instead of selling products on your website, you list them on Amazon!
Can you use Amazon for dropshipping?
Amazon is an ecommerce platform you can use to sell your own products. From the statistics, we know that Amazon has more than five million active sellers, and around 50% of all sales on Amazon come from third-party sellers.
However, can you also do dropshipping on Amazon?
Technically, it is possible to do dropshipping on Amazon. However, Amazon's dropship policy makes Amazon one of the most challenging platforms to use for dropshipping.
In the image below, you can see the requirements to dropship on Amazon:
As you can see, dropshipping on Amazon is generally acceptable, but you will have to find a supplier that:
- Identifies your dropshipping store as the seller of the product (on all packaging slips, invoices, external packaging, etc.).
- Removes any information on the product associated with them.
- Accepts responsibility for accepting and processing customer returns for you.
- Complies with all other applicable Amazon policies.
To put it short, dropshipping on Amazon is technically possible, but it will be really challenging to find a supplier that complies with Amazon's dropship policy.
Amazon also says that dropshipping by purchasing products from another online retailer (such as AliExpress) and having that retailer ship directly to your customers is not allowed on Amazon.
If you're determined to do dropshipping on Amazon, you would have to find some kind of private label dropshipping supplier that can identify your business as the seller of the product and accept customer returns for you.
So, what do we recommend here?
Well, there are two main routes to take from here:
- Start dropshipping by creating an online store (on an ecommerce platform like Shopify).
- Sell on Amazon using the Amazon FBA (Fulfillment by Amazon) model.
If you want to start dropshipping, we recommend doing it via an ecommerce platform like Shopify. That way, you will have your own store and won't have to comply with any dropship policies from third-party marketplaces!
You can find a step-by-step guide to building your own dropshipping store here.
And if you're determined to sell products on Amazon, let's dive into Amazon FBA a bit more!
How do you sell products on Amazon?
Amazon FBA is one of the most popular business models used to sell products on Amazon.
It has a few similarities with dropshipping, but there are also differences.
The main difference between Amazon FBA and dropshipping is that with Amazon FBA, you must buy inventory and send it to Amazon's warehouse beforehand. Meanwhile, dropshipping lets you start selling products without investing in inventory first.
Amazon FBA is a service that allows third-party sellers to store their products in Amazon's fulfillment centers.
When using Amazon FBA, Amazon handles your product storage, shipping, and customer service.
Like dropshipping, Amazon FBA is a great option for sellers who want to focus on growing their business without worrying about the logistics of fulfillment.
In addition, FBA may help you reach more customers since customers trust Amazon's shipping and customer service.
To learn more about Amazon FBA, you can visit Amazon's official FBA page here.
The pros of selling on Amazon
For some, selling on Amazon may be a perfect business model. That's mainly because of these pros!
1. Large customer base
Amazon is a giant and popular ecommerce platform with millions of unique visitors that come for online shopping.
Being a seller on Amazon will allow you to reach a large audience. A whopping 63% of online shoppers start their search on Amazon!
2. Customer trust
Any business will tell you that customer trust is essential. People are more likely to buy from companies that they feel they can trust, and this is especially true when shopping online.
Amazon has built a reputation as a reliable and trustworthy online marketplace, which gives sellers a significant advantage. Because shoppers know that they can expect a certain level of quality and service from Amazon, they are more likely to take a chance on new products and sellers.
As you can see below, the level of trust influences the purchase decision for a significant part of survey respondents:
3. Hassle-free sales
With Amazon, you don't need to worry about customer service, handling, shipping, and returns. That's because Amazon takes care of all that when you use Amazon FBA!
Amazon's team is trained to handle all types of customer inquiries, including returns, refunds, and product questions. They are also experts at troubleshooting any issues that may arise during the purchase process. Above all, they are available 24/7!
As a result, you can focus on growing your business, knowing that your customers are in good hands.
4. Scalable
Amazon's FBA system has been designed so that you can scale your business quickly and effectively.
For instance, they have programs in place that allow you to:
- Reduce the fulfillment cost of low-cost, small, or lightweight inventory.
- Offer discounts for repeat customers.
- Offer fast Amazon Prime shipping.
- Sell your products in more than 100 countries.
- And more!
5. Cost-effective
It goes without saying that Amazon achieves significant economies of scale benefits with its FBA program.
As Amazon processes so many packages, it can offer its sellers a cost-effective fulfillment solution.
As a result, two-day shipping on Amazon FBA costs 72% less per unit compared to shipping options offered by major US carriers:
The cons of selling on Amazon
Selling on Amazon has some cons too. Otherwise, everyone would do it!
Let's go over the main ones:
1. Fulfillment fees
When you use FBA, you have to pay for storage, shipping, and other associated costs.
These fees can add up quickly and can eat into your profits if you're not careful.
As a result, it's important to do your research and ensure that you're aware of all the fees before you list your items for sale on Amazon. Otherwise, you could end up paying more than you anticipated, and that could impact your bottom line.
2. Heavy competition
You may think that by doing dropshipping on Amazon, you would be offering your products to a vast audience, and your success chances would be higher. But the fact is that every coin has two sides.
With millions of products available for sale, it can be difficult to get noticed. And even if a potential customer does find your listing, they may be immediately turned off by the number of other options available.
This heavy competition can make it hard to sell even the most unique and high-quality products. In addition, many Amazon sellers are constantly looking for ways to undercut the competition, which can lead to slim profit margins.
3. Requires a significant investment
Selling a product through Amazon FBA typically requires a rather large investment.
In fact, it's typically a lot more compared to the investment you need to start dropshipping.
When selling a product through Amazon FBA, there are two main investments you will have to make.
First of all, you will have to purchase an inventory of your product to send to Amazon's warehouse. That means not only paying for the products themselves but also for the shipping costs to the warehouse.
Secondly, you will have to invest quite a bit into Amazon Ads to increase the ranking of your product listing. You will start at one of the last pages of your main keyword, and the primary way to increase that ranking is by getting orders and reviews on your product listing.
Therefore, it's common to see Amazon sellers running their activities at a draw or even a loss at the start just to increase the ranking of their product listing!
Why is an online store great to have for a dropshipping business?
If you're interested in dropshipping, it's a sure thing that an online store is great to have.
Not only does it provide a convenient way for customers to browse and purchase products, but it also offers a number of advantages over selling on Amazon.
One of the main benefits of running a dropshipping business is that you don't need to carry any inventory.
When a customer places an order on your website, you simply contact your supplier, and they ship the product directly to the customer. This greatly reduces your risk as well as your start-up costs.
With an online store, you can control the look and feel of your website and create a strong branding strategy that will set you apart from your competition.
For more advantages of dropshipping on your online store, you can check out this article!
FAQs about dropshipping on Amazon
If you have more questions about dropshipping on Amazon, chances are they will be answered here!
Who can dropship on Amazon?
Anyone can dropship on Amazon as long as they comply with Amazon's dropship policy and any other applicable policies.
Can you dropship on Amazon legally?
Dropshipping on Amazon is legal, but there are strict policies you should adhere to. Doing this will prevent your account from getting suspended.
Is it recommended to dropship on Amazon?
Due to Amazon's relatively strict dropship policy, we don't recommend starting a dropshipping business on Amazon. Instead, using an ecommerce platform like Shopify will allow you to free up choices in terms of which suppliers to work with and your store's design.
How much does it cost to sell on Amazon?
Amazon's individual plan charges you $0.99 per sold item, while the professional plan costs $39.99 per month, no matter how many units you sell. Then, Amazon's pricing also depends on your product category, fulfillment strategy, and more.
Summary
Before we go to the conclusion, we’ve created a quick summary of this article for you, so you can easily remember it:
- Amazon dropshipping works in the same way as traditional dropshipping. However, instead of listing the product on your own store, you make a product listing on Amazon.
- Technically, it is possible to dropship on Amazon. However, Amazon's dropship policy makes it hard to find suitable suppliers for it.
- Amazon FBA is likely to be a better model for selling Amazon products than dropshipping.
- If you want to start dropshipping, we recommend using an ecommerce platform like Shopify to list your products on.
Final verdict
To conclude, Amazon dropshipping is generally acceptable as long as you comply with Amazon's dropship policy.
However, that exact dropship policy also makes it really hard to dropship on Amazon according to the rules.
For this reason, we recommend taking one of the following two paths:
- Continue your plans to sell on Amazon, but use the FBA model.
- Continue your plans to do dropshipping, but on an ecommerce platform like Shopify.
To conclude, dropshipping on Amazon may be appealing at first glance, but there are some significant drawbacks that should be considered before taking the plunge.
Let us know in the comments if you have any further questions, and good luck with everything!
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