Dropshipping Success – How to Start a Profitable Dropshipping Business on Amazon
With the pandemic affecting individuals and businesses worldwide, you might be looking for ways to start a business that won’t cost much startup capital. Good thing that dropshipping is still profitable and very much relevant to the changing times.
Dropshipping is an easy startup business that requires no brick-and-mortar store and no stocks to store in warehouses, so it is easy to maintain. All you need are some basic technical know-how, leadership, and social skills. Add them to your online presence in the form of a website or landing page on online marketplaces like Amazon and voila! You’ve already got a business of your own.
Amazon is a multi-vendor online marketplace that supports several business models, including dropshipping. When you decide to dropship on Amazon, you need to take note of a few things to ensure the success of your e-commerce business.
Although it sounds easy, understanding the fine details of dropshipping and equipping yourself with the right information is the best way to launch your online business.
What is Dropshipping?
Dropshipping is a business model where sellers do not keep the inventory or stocks of products they sell and let a third-party retailer or manufacturer fulfill the orders of their customers.
In other words, dropshipping allows sellers to market and sell products to customers without worrying about inventory and shipping.
How it works:
In a dropshipping business model, the seller lists and sells products sourced from manufacturers or vendors on online marketplaces like Amazon.
They promote these products on e-commerce platforms and social media. When a customer purchases an item, whether it’s on a store, landing page, or website, the seller oversees up to the checkout process.
After confirming the order, the seller pays the manufacturer and passes the order fulfillment process to them. The manufacturer then packages, labels, and ships the item to the customer. What’s left for the seller to do is monitor and track the delivery and update the customer.
However, when it comes to returns and refunds, the seller is responsible for negotiating with the buyer and supplier.
In summary, there are three main elements in the dropshipping model: seller, buyer, and supplier or manufacturer.
How to Start Dropshipping on Amazon
Amazon dropshipping works like any dropshipping business. However, the key difference is that sellers can only sell on the Amazon marketplace.
They can’t sell exclusively on standalone e-commerce stores or websites.
To dropship on Amazon, you must first have an e-commerce store or website where you sell your products.
You also need to create an Amazon Seller Central Account to be able to sell on Amazon.
Once your Amazon store or landing page is ready, you can start integrating your e-commerce store or website to Amazon and sell your items.
Nevertheless, you need to read and be aware of certain factors that come with Amazon dropshipping. For starters, Amazon has its own dropshipping policy that you need to understand to successfully dropship on the platform. It’s a set of guidelines that sums up to three main rules:
- You need to sell on Amazon to be able to dropship.
- Buyers or customers can’t know that your products are dropshipped. They should be able to identify you and only you as the seller in all packaging, labels, invoices, etc.
- You can’t sell your items on other online marketplaces that compete with Amazon, e.g., AliExpress, eBay, Walmart, etc.
Factors to Consider in Starting a Dropshipping Business on Amazon
Product niche, or simply niche, refers to a particular kind of product you sell to a specific market segment. It simply answers what to sell and to whom. For instance, selling handmade knitted swimsuit pieces to working millennial ladies who love the beach is a niche—or selling fashionable clothes but focusing on athleisure only. That is a niche.
To be able to find your niche, consider your skills and interests—research trending products and unsaturated markets. Make comparative analyses for the products you consider selling.
For product niche ideas, you can check out this blog: 6 Most Profitable Niches for eCommerce Dropshipping.
Product sourcing, in general, is the method of finding products to sell. It involves knowing where to search and source your products.
You can source products on different online marketplaces and sell the products on Amazon and your e-commerce store as well.
For example, you can research products on AliExpress and find suppliers there, then list their items on your Amazon store or landing page. It is allowed as long as you and the suppliers are willing to adhere to Amazon policies on dropshipping.
Product sourcing includes looking for suppliers. However, it deserves a number of its own because of the many things you have to consider to pinpoint the best and reliable suppliers.
- Store rating and feedback
To find trustworthy and credible suppliers, look for their store ratings. A high store rating signifies a lot of positive things, like customer satisfaction to service and quality. But you need to see how many reviews the store has. The higher the number of feedbacks is, the greater is the chance that the store rating is authentic and not faked by the vendor.
Read through the feedback, and you’ll know the customer service and quality of the products supplied by the vendor. You’ll also be able to identify problem areas like handling returns and exchanges.
- Customer service
Message possible suppliers on their store or email them with questions regarding the quality of products they sell and replenishment of inventory. Observe their response time and how they handle your queries or concerns. It gives you an idea of how they handle their customer service.
This process is important because if there are shipment or quality issues, you need help and information from the supplier to assist your customer. Communication with the vendor is an important weapon in building and scaling your dropshipping business.
- Product Sample
When you start considering a vendor as your supplier, order sample items from their store. By doing this, you can figure out how long it takes for an item to arrive.
You also get to personally see and feel the product and determine its quality. Moreover, it helps you fact-check if the product information on the vendor’s product page is true and complete.
- Returns and refund policy
Communicate with the vendor regarding their return, exchange, and refund policies. Vendors on Amazon are usually subject to its return and refund policy, but it still varies for every seller.
Because your customer’s orders are packed and fulfilled by vendors from their own inventory, it’s understandable that they set their own return policies relevant to the shipping times and fulfillment method used.
The same can be said about the suppliers from other marketplaces where you source your products. They may follow the marketplace’s return and refund policy or set their own terms. Ask, so you’ll be able to set your customers’ expectations.
- Fulfillment method
It would always help to check on the fulfillment methods offered by your future supplier. Do they use shipping methods offered by their marketplace? Who are their logistics partners, and who are their 3PL partners when the products arrive at your customer’s country or location?
- Shipping times
Knowing your future supplier’s fulfillment method lets you know their shipping times. Customers would always prefer a fast delivery. Shipping times depend on the shipping options available and the vendor’s 3PL partners. You can visit the seller’s store to learn about shipping options and shipping times or message them directly to know.
Dropshipping on Amazon FBA
Amazon provides an alternative program where you can dropship your items. It’s called Amazon FBA, and its services include storing your inventory in Amazon warehouses or fulfillment centers, packing, labelling, and shipping your products to your customers.
Amazon has its own inventory, so basically, it becomes your supplier where you source products.
The items you list on your Amazon store or landing page are stored in its fulfillment centers, and when customer orders, they handle the shipping for you.
Your other suppliers can also use this program to fulfill the orders of your customers. Or, you can buy retail products from other suppliers and have them send them to Amazon. Then Amazon FBA will package and send it for you.
Pros and Cons of Amazon Dropshipping
Like any other business, dropshipping on Amazon also has its benefits and disadvantages. Knowing them will help you decide whether this business model suits you or not.
Do I need startup capital to start a dropshipping store on Amazon?
To set up an Amazon store or landing page, you won’t need any startup capital. The fee for using the platform is also deducted only after making a sale. However, you will still need to allot a budget in setting up your e-commerce store or website on website builders like Shopify.
These are plan-based, and you also need to pay for add-on apps to automate your business and integrate your store to online marketplaces like Amazon.
What e-commerce platforms can I integrate with Amazon to be able to dropship on its platform?
Some of the website builders you can use to build your e-commerce store and integrate with Amazon are Shopify, BigCommerce, WooCommerce, Volusion, and Wix. However, every one of them has certain criteria or required dropshipping tools to integrate with Amazon.
Is dropshipping on Amazon still profitable in 2022?
Definitely! Online shopping is becoming more accepted in our modern lives, and dropshipping is one of the few digital business models supporting this modern way of life. Many entrepreneurs successfully established their brands by dropshipping items.
Contrary to circulating news about dropshipping being dead in 2021, it’s still profitable and thriving. In fact, it’s making a comeback from being a classic business model that’s older than the Internet to a modern online shopping solution. In 2017 alone, dropshipping accounted to 23% of e-commerce online sales, according to Forrester Research.
It is one of the low-cost, easy-setup business models on Amazon that seasoned and beginner entrepreneurs can try to stay relevant to the changing times. It is safe and ensures a profit so long as the seller continues to study its ins and outs.