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Even though Amazon is one of the largest retailers in the world, more than half of its products are sold by third-party sellers.
Amazon offers several ways to sell goods on the platform, one of which is dropshipping. Amazon dropshipping can be a great way to make money selling without having to hold inventory or fill orders. For those wondering how to dropship, this guide will explore what it is, how it works, and how to get started with this potentially lucrative side hustle.
What is dropshipping?
With dropshipping, a seller sets up an online storefront – or uses a selling platform such as Amazon – to take orders for products, but is not directly involved in sourcing, storing, and shipping the products. products. Instead, the seller outsources these responsibilities to a third party.
Dropshipping has low overhead and is ideal for entrepreneurs who don’t have the financial means or the storage space to manage physical inventory.
How Amazon Dropshipping Works
Dropshipping agreements vary by vendor, but typically the vendor handles all customer service and the vendor only handles product fulfillment. Here’s how Amazon dropshipping works:
- A person creates an Amazon seller account and creates listings to promote and sell products.
- When a customer orders a dropshipping product on Amazon, the seller sends the order to the supplier.
- The seller is also responsible for informing the customer that the order is being processed.
- The supplier processes and ships the order.
Amazon Drop Shipping Policy
Amazon dropshipping sellers must follow Amazon’s dropshipping policy to avoid violations that may restrict the seller’s ability to sell on the platform. The policy can be found on Amazon’s website, but there are a few key things to know before finding product suppliers or creating an Amazon selling account.
The seller with the Amazon account is considered the official seller. All products shipped must include Recorded Seller information on all invoices, packing slips, and external packaging. The official seller must ensure that any supplier used to purchase products accepts Amazon’s drop-shipping policy.
The Official Seller is also responsible for receiving and processing customer product returns in accordance with Amazon’s policy.
Amazon Selling Fees
Amazon has a fee structure listed on its site that varies by seller:
- Selected sales plan — Individual or Professional
- Type of product
- Execution Strategy
- Registration volume, optional advertising and other factors
Sellers must incorporate fees into their product pricing to ensure a profit.
How to Start Earning with Amazon Dropshipping
Amazon provides a lot of help for new sellers learning to use the platform. Here’s how to start dropshipping on Amazon in five steps.
1. Sign agreements with one or more suppliers
It is essential to find a legitimate wholesaler or supplier who will ship products according to Amazon’s drop shipping policy.
Suppliers may be more willing to sign an agreement with a company than individuals. Sellers who have formed an LLC or other business entity may seem more legitimate. Setting up a business can also reduce the seller’s liability in the event of a lawsuit.
Different vendors will have different requirements. Some vendors may charge a monthly fee or have minimum monthly order requirements which could be costly for new sellers.
2. Create an Amazon seller account
Amazon offers two selling plans: Consumer and Professional. New sellers will need to choose a plan when creating a seller account. Sellers have the flexibility to upgrade or downgrade their selling plan at any time.
Those who sell more than 40 items per month might benefit more from Amazon’s Professional plan. However, new sellers may wish to start with the Individual plan until they determine their monthly sales.
To complete an Amazon seller account registration, sellers may need to provide the following information:
- A bank account number and bank routing number to receive payments from Amazon
- Credit card information for payment of Amazon seller fees
- A government-issued national ID
- Tax information
- A phone number
3. Configure Amazon Product Listings
How sellers upload and list their products varies depending on their selling plan.
Sellers with a business account can list their products by bulk uploading listings or using a third-party inventory management system. Those with an individual plan should list products one at a time. All sellers can match another seller’s existing listing for a specific product or create a new listing if the product is not yet available on Amazon.
It is important to note that when multiple sellers offer the same product, Amazon combines the information from all uploaded product pages from all sellers into a single product detail page.
Once a product is listed, it is available to all Amazon consumers, including business customers. Sellers can then fulfill orders and start earning.
4. Resolve customer issues
Amazon requires the Registered Seller to resolve customer issues and process product returns. Since Amazon’s platform encourages buyers to leave seller feedback, prompt customer service can often mean the difference between positive and negative reviews.
Sellers should answer customer questions about products and ensure prompt responses to any issues.
5. Track sales in Amazon Seller Central
When logged into Seller Central, sellers can perform the following tasks to monitor and track sales:
- Track inventory and daily sales
- Update product listings
- Download custom sales reports
- Contact support and open help tickets
Amazon dropshipping can be a lucrative side hustle for an entrepreneur looking to make money selling on Amazon without having to buy and store inventory. The key is to find products with a low enough wholesale price that will allow for an acceptable markup to cover costs while still providing a profit.
Before listing products, new sellers on Amazon should carefully read Amazon’s dropshipping policy and determine product listing requirements, such as photo size, product title, and description guidelines.
Here are the answers to some common questions about dropshipping.
- How can I make money fast dropshipping?
- The fastest way to start making money dropshipping is to sell through a site like Amazon, Shopify, or WooCommerce rather than creating a custom website. Selling print-on-demand products like t-shirts and coffee mugs is one of the fastest ways to start making money.
- Can I make money with dropshipping?
- The key to making money with dropshipping is finding a high-demand product that can be bought at a low wholesale cost and then sold at a reasonable price. Any profit must cover the costs associated with the sales platform and the supplier.
Information is accurate as of July 20, 2022.
Editorial Note: This content is not provided by Amazon. Any opinions, analyses, reviews, ratings, or recommendations expressed in this article are those of the author alone and have not been reviewed, endorsed, or otherwise endorsed by Amazon.