Amazon Dropshipping Guide: Is it the Best Option for Your Business?

An image featuring a blurred background with a businessman in a half-body shot, touching a hologram of dropshipping, illustrating Amazon dropshipping guide

Last updated on June 28th, 2023

Written by Mohamed Aden

The entire process of carrying inventory and shipping products can get troublesome. This is not surprising given all the details you need to process—not to mention the workforce required—to ensure that every process goes smoothly. Thankfully, you can always resort to various fulfillment options, one of which is what our Amazon dropshipping guide will explore.

Is dropshipping on Amazon a suitable business model for your eCommerce store? Let’s find out.

An Amazon employee handing an Amazon package to a seller, representing the concept of dropshipping

How Does Dropshipping Work?

Before going into detail about how the process works on Amazon, it’s crucial to understand what dropshipping is and how it operates. What does it mean when online sellers drop ship their products?

Typically, the seller works as a one-person team in an online business setting. They are responsible for creating their products, communicating with their customers, managing their item inventory, handling transactions and order fulfillment, and ensuring customer satisfaction.

The process seems simple enough, but it can become complicated, challenging, and tiresome once the orders start rushing in. This is where the dropshipping business model comes in.

When you dropship your products, you can sell them without being responsible for carrying them or shipping them to your customers. 

There are drop shipping firms you can tap at the ready. They all specialize in rendering the same service, but each firm's rates may vary accordingly. Meanwhile, your duty as a seller is to fulfill those orders by communicating with the preferred third-party provider. 

To better understand how this process can work to your advantage, take note of the following details:

  • As a retail fulfillment technique, dropshipping relieves sellers of the hassles of maintaining stock. Sellers using this model buy products from a third party responsible for sending them to the customer's location.
  • The third party is either a wholesaler or manufacturer. It takes charge of stocking, handling, and shipping the goods. 
  • The seller is the middleman, taking charge of the entire transaction process and ensuring that your provider delivers the required goods to your customers on time.

The Pros and Cons of Dropshipping Your eCommerce Store

Starting a business via the dropshipping model does not require investing vast amounts of money. But do not let this fact mislead you into thinking the whole process is a walk in the park. Like every other procedure, it has its own merits and challenges.

The Pros

No need to lose sleep over inventory issues

Inventory management involves balancing stock to ensure you always have enough to cover demands but not too much that you lose money. With dropshipping, all these issues are on your supplier's shoulders. This means less risk and less work involved. And to top it off, you do not have to worry about building or finding warehouses and hiring people to operate them.

Freedom to choose various products

Aside from trouble-free inventory, dropshipping gives sellers flexibility regarding product selection. Unlike traditional selling models wherein you must stock up on several items without guarantee of selling all of them, dropshipping allows sellers to list products from various suppliers without needing upfront inventory investment. 

This flexibility enables you to adapt quickly to market trends, test different product categories, and easily add or remove products from your online store based on customer demand or preferences.

Avoid investing large sums of money.

Most of your business expenses go to the price of goods, advertising, and the website. Aside from not having to spend on building or leasing warehouses, you do not have to buy products in advance. You only buy them when your customers order them.

Hassle-free product testing

With an opportunity to test products, you will have no trouble running advertisements on any of your offerings. You will be able to determine which one converts best. Should some of them become unpopular with your customers, you can take them out without worries. 

Having no inventory to manage means you do not have to lose much money when taking out a low-performing product. You only have to spend on advertising. So, the next time you want to buy an inventory, you already have a good grasp of the kinds or types of products that would yield more profits. With this, you will also know the ideal number of SKUs you should have.

The Cons

Less money invested, fewer returns expected.

If you think you will profit more from dropshipping because you do not have to manage an Amazon store or stock your inventory, think again. A significant portion of every unit you sell still goes to your supplier.

Low overhead but high competition

The fact that you do not have to invest in production or storage translates to low overhead expenses. It would have been great if you were the first or only one to develop this idea. Unfortunately, dropshipping is not a novel concept.

Many Amazon sellers like you may have been practicing it for quite some time now. Worse, your supplier may also be supplying them with the same products!

You have no hand in quality control.

Once you communicate the details of each order to your supplier, they will take charge of sending it to your customers. Therefore, you do not get to inspect each unit before shipping.

Suppose your customers are satisfied, perfect. Otherwise, you will have to field complaints and inquiries and process everything communicating back and forth between your customers and suppliers.

But dissatisfied customers ranting about purchases that failed to meet expectations is not the only issue you will deal with. Delayed shipment is another problem. Being on the frontline, you are responsible for communicating with the customer and following up with your supplier.

Possible Legal Issues

Suppose you aren’t careful and keen enough to choose your dropshipping supplier. In that case, you may encounter serious legal problems that can damage your brand reputation and ultimately put a stop to your business venture.

Legal issues associated with dropshipping may include intellectual property infringement, product liability, and unauthorized sales. To avoid such issues, hiring reliable suppliers or manufacturers and constantly communicating with them is best.

Amazon Dropshipping Guide: The Essential Details

Amazon dropshipping is the only method dropshippers can use to sell products on the platform. The marketplace has explicitly mentioned in its policy that it does not allow sellers to buy products from and ship them through another online retailer. 

Read on for an overview of how this process can work in your favor.

What to Keep In Mind When Dropshipping on Amazon

So, you’ve opened your Amazon seller account, complied with the Amazon seller agreement, and are ready to partake in the dropshipping agenda on the platform. What's next?

First, you must follow these rules to ensure legal dropshipping practices. This may also help you become recognized as one of the best dropshippers for Amazon. 

  1. Buy goods from dropshipping suppliers and manufacturers ONLY, NOT from other retailers.
  2. See that only your information appears on the external packaging, invoice, and packing slip of every product you send to customers, not the third party's.

How Does an Amazon Dropshipping Business Model Work?

Before you can get an answer to the question, “Is Amazon dropshipping profitable?” you need to know how to go about the whole process first. After learning and mastering the steps, you can start contemplating profitability and find the best Amazon dropshipping products.

Infographic about the steps of the Amazon dropshipping process: (1) order placement, (2) order confirmation, (3) production, and (4) order fulfillment

Best Practices to Excel in Amazon Dropshipping

Your journey to mastering dropshipping on the online marketplace must not stop at knowing the basics of the business model. If you’ve decided that dropshipping suits your business, you must also learn and master techniques for successful Amazon dropshipping. 

Hire a reliable dropshipping manufacturer.

The most crucial aspect of any dropshipping scheme is the product. The success of your drop shipping business all boils down to how the product meets the needs and expectations of the customers. As a result, it’s essential to find a trustworthy dropshipping supplier who maintains open communication and can guarantee the delivery of high-quality products. 

To give you a brief overview, here are some essential qualities to look for when choosing an Amazon dropshipping manufacturer:

  • Produces quality and tested products
  • Offers fair per-order prices
  • Provides fast and timely shipping
  • Has previously worked with other Amazon sellers
  • Provides customer service support
  • Has sufficient expertise in the industry 

Constantly communicate with your supplier.

This next tip should go without saying for every online entrepreneur, but sometimes, we may need a little reminding. The success of a dropshipping model relies heavily on the communication between the seller and the supplier. Without clear and effective communication, running a dropshipping operation is challenging.

Open communication between the two parties will allow the seller to address product issues and customer concerns easily and instantly. For instance, by constantly communicating with your manufacturer, you will know what items are available and in stock. This includes immediately relaying customer feedback to your manufacturer.

Optimize your product listing.

Once your product's quality is secured, the next step is to ensure your target market sees your product. All your efforts in finding an excellent dropshipping supplier and product will go down the drain if nobody knows what you sell.

An excellent way to ensure product visibility is to optimize your product listing. Optimization includes placing relevant keywords in the title and description. Use relevant key phrases in them so your products will pop up when interested buyers search for similar products.

Monitor your performance.

Constantly tracking how your product and sales are faring is important in identifying areas of improvement. But performance tracking isn’t solely about sales, conversions, and leads. It also involves analyzing the product’s ranking and good and bad reviews to refine your offerings, address customer concerns, and continuously improve to meet market demands.

This Is Just the Beginning

Now that you have learned the nitty-gritty details of dropshipping on Amazon, you’re well on your way to building a path to success! With the tips we’ve laid out above, we hope your dropshipping journey will be smooth sailing. 

Still find the whole Amazon dropshipping agenda confusing? Let the professionals help you!Succeed as an Amazon seller through the expert assistance of our account managers. Feel free to inquire about our account management services via our free consultation today.

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