Amazon dropshipping: Everything you need to know

This article is written for our Singapore blog, but the same principles apply wherever you are in the world, so read on. We've got some great advice in store for you.

Dropshipping is a smart new way to build, grow and profit from an ecommerce business. Entrepreneurs can create dropship companies for a relatively low initial outlay, limiting the risks involved. This makes it easier to get started - although it also pushes up the competition.

Finding the right platform to use when dropshipping is crucial to building a successful business. This guide will walk through how Amazon dropshipping can be done, including some tips and tricks to get your business off the ground.

We’ll also cover how Wise can help ecommerce entrepreneurs selling in overseas markets - or working with international suppliers - save money on currency conversion, and boost profits. Let’s dive right into the world of dropshipping with Amazon.

For our guide to dropshipping in Singapore just click here.

Table of contents:
What is Amazon? Amazon dropshipping policy Dropshipping on Amazon: step by step Fulfilled by Amazon (FBA) Use Shopify’s Amazon integration How to save money and cut currency conversion fees Amazon dropshipping tips

What is Amazon?

Amazon is the world’s largest online retailer - and despite being just 25 years old, Amazon has changed the way people around the world shop every day. As a marketplace platform, you can buy pretty much anything on Amazon - with sellers all over the world connected instantly to their global customers.

Amazon is massive, with significantly more regular users than any other competitor. But what’s probably more important is that customers trust Amazon. Some 89% of people who were asked in a recent survey said they trusted Amazon above other ecommerce sites¹. This brand value comes down to Amazon’s constant push to ensure their sellers meet customer demands - and makes Amazon a great platform to get involved with.

There are already over 2.5 million sellers on Amazon, making a living, boosting a main income, or simply selling for fun. If you’re thinking of becoming one of them, you’re in the right place.

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Amazon dropshipping policy

It’s important to know that one of the reasons Amazon is trusted by customers is that there are strict - and strictly enforced - rules in place for sellers. Breaches can result in your Amazon account being suspended or terminated, so knowing the rules which apply to your business type is important.

Amazon, like other marketplaces, is wary of dropshipping. Marketplaces want to maintain a good experience for the customers served, and worry that bad dropshippers may not provide the top notch service and product quality they want. While this is not the case for many committed dropship entrepreneurs, it’s a reality of marketplace selling that all dropshippers have to work with.

With Amazon you’ll need to scrutinise the rules which may apply to the model of business you want to set up. This will mean looking at the local rules wherever you’re selling, in addition to the Amazon Singapore terms and conditions.

To give an example, in the US, Amazon specifies that sellers must be the seller of record of any products, and it must be your name which appears on the products, packing slips and invoices. You must also personally manage customer returns - these can not be done by the wholesale supplier.²

One smart way to manage a dropship business model with Amazon is to use Fulfilled by Amazon - FBA .This is an Amazon supported service to hold, pick and pack inventory on behalf of sellers. It is similar to other dropship models, although you will need to invest in the inventory in advance to benefit from this system. More on Amazon FBA coming right up - or you can find many more details online over on Amazon’s web page.³

Amazon selling categories

Before we move on, a quick word about what you can - and can not - sell on Amazon⁴.

Amazon has 20 open product categories, where sellers do not need any special approvals to get started. There are then a series of product categories which require the seller to apply for permission to sell. Finally, as a result of local regulations in Singapore, there are also products which require the seller to provide documentation of safety if you’re planning on selling locally, or using FBA.

This all means that getting started selling on Amazon is not quite as simple as choosing a product and listing it right away. You’ll also need to take a look through the product categories and make sure you’re in a niche which is allowed without permissions - or follow the processes to get your account properly set up for restricted categories.

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Dropshipping on Amazon: step by step

Let’s start with the basics of how dropshipping works as an ecommerce model.

As a dropshipper you’ll find and market your chosen products through your own online store or chosen marketplace site. So far, so familiar. However, unlike other methods of online selling, with dropshipping you don’t buy the products you intend to sell** upfront**.

Instead you set up agreements with wholesale suppliers, which mean that they fulfil customer orders directly. When a customer places an order with your store, you pass the details to the supplier, and they pick, pack and ship the goods. In some dropship models, the supplier will even manage returns and customer care for you too - leaving you to concentrate on generating sales.

The customer pays you the retail cost of goods. You then pay the wholesaler your agreed price - and keep the difference.

The beauty of this model is largely that it’s low risk. You don’t need to worry about buying large volumes of stock, paying for storage, or spending hours packing and dispatching parcels. Instead you can concentrate on building a fan base, connecting with customers and selecting products which will fly off your - virtual - shelves.

Fulfilled by Amazon (FBA)

The nature of dropshipping means you can sell items anywhere in the world. You may be in Singapore, but you could choose to target a niche market in the UK, with a supplier based in France, for example. To dropship with Amazon you’ll need to familiarise yourself with the Amazon dropshipping rules, which may vary depending on where you’re planning on selling.

Or, you can choose to use Amazon’s own service - Fulfilled by Amazon or FBA - which is very similar to dropshipping.
Here’s how FBA works:

• You’ll first need to register an Amazon seller account
• Add product listings to Amazon, and optimise to make sure they’re eye catching
• Make sure your products are all ecommerce ready
• Ship products to one or more of Amazon’s fulfillment centres
• When customers order, Amazon picks, packs and ships orders quickly
• Amazon looks after customer questions, aftercare and returns with their 24/7 service

Use Shopify’s Amazon integration

Another smart option, if you’re already using Shopify as your main ecommerce gateway, is to use Shopify’s integration with Amazon to make more from the 2 channels.

There are a number of benefits to doing this - especially as many shoppers head straight to Amazon to research items they may buy. By having a presence there, you’ll be spotted by customers who are already engaged, giving your business a boost.

Check out the guidance available from Shopify on using the integration⁵, and remember to make sure you’re following all of Amazon’s user agreement terms and conditions before you go live.

Selling overseas? Use Wise as a smart way to cut your currency conversion costs

If you’re building an ecommerce business you can do more if you tap into foreign markets. By connecting to customers elsewhere you build a bigger fan base and boost your sales. You may also discover that you find better products, and more attractive prices if you cast your net more widely for suppliers.

However, when you’re working with customers or suppliers based overseas, you will need to find ways to work with foreign currencies while protecting your profits.

A service such as Wise can help. Say you need to withdraw your money from your US store, where you use a payment platform such as Stripe. Wise lets you get a balance with local US bank details, to where you can withdraw your US dollar earnings. Then you can easily convert the money using the fair mid-market exchange rate to your local currency. This way you can avoid nasty currency conversion and transaction fees, which will often apply to these types of transactions.

💼 Case Study: Learn how online marketplace Novelship saves around $20,000 and 20 hours a month by using Wise Business to pay overseas suppliers

If a platform requires you to have a local bank account to sell in a specific country, you’ll be able to use these details to get set up.

Wise isn’t just about saving money. You can save time too, with smart integration with Xero accounting tools, batch payment options and a powerful open API. See how Wise can help you grow your dropshipping business today.

See if you can save with Wise

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Amazon dropshipping tips

Let’s round off with some smart ideas to help you grow your Amazon dropshipping business.

Know your customer

Dropshipping really lets you concentrate on building your customer base, connecting with fans, and learning how to bring the right products to them. For this to work, you have to have a very clear view of who your target customer really is.

Think carefully about who you’re selling to, where they hangout, what platforms and social media channels they prefer, and how they make purchasing decisions. This will help you create a sharp focus to your marketing efforts, and make sure your products really meet a need in your chosen customer group. You’ll be able to build a strong and recognisable brand within your niche, by creating an ongoing conversation and adding value with your marketing.

Make the most of marketing

The marketing methods which work best for you may vary depending on who your customer is. Getting a clear picture of your potential buyers will mean you can target your ads - and avoid wasting money.

Checkout Amazon pay per click ads, as well as FaceBook, as smart ways to get your messages in front of engaged buyers. You can also use other channels like Instagram, or create a blog or email marketing strategy.

Your marketing is a long term strategy, so think about how you create an initial connection with customers, and how you can build to a sale over time.

Create a powerful customer experience

You can’t afford negative customer feedback in any business - but on Amazon this is especially true. Make sure you have quality products which you’re proud of, and a system for customer questions, complaints and returns. You can also think about smart ways to reward and say thanks to customers, such as offering discounts for people who sign up to your email list, or adding a free gift into purchases made.

Ask customers to leave reviews for your products, as this can help to build trust. It’s also an essential way to get valuable feedback about what is and isn't working for your key market.

Use Amazon as a springboard to more

Amazon is a great place to learn more about what works for your dropshipping business. You can trial products on Amazon and see what works well, before listing your selection in your own ecommerce store, for example. Because Amazon has such a huge user base, it’s a quick and simple way to get feedback which can help you move on to the next level of your regular ecommerce store.

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Dropshipping as a model is attractive to many people, from newbies starting out to experienced ecommerce entrepreneurs. The simplicity of dropship sales means it’s accessible to everyone.

If you’re thinking about using Amazon dropshipping, make sure you do your research into what is and is not allowed in the markets you’re tapping into. Choosing Amazon’s own FBA service is a simple way to avoid issues, and provides a similar experience to dropshipping - giving you the chance to grow your business.

No matter where in the world you’re going to sell, make sure you find a smart way to manage your money across countries and currencies. International payment fees and poor exchange rates can eat away at your profits - and dropshipping is too competitive a game to allow that to happen. Using a smart service like Wise Business can make all the difference, allowing you to offer keen prices to your customers, and make a healthy profit too.

Grow your business with Wise. Sign up today for an online business account with a one-time fee of S$ 99 to get started.

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Sources:

1. Oberlo - 10 Amazon Statistics You Need to Know in 2020 [April 2020]
2. Amazon Seller Central - Drop Shipping Policy
3. Amazon Services - How Fulfilment by Amazon (FBA) works
4. Amazon Services - Product categories for Selling on Amazon
5. Shopify - How to Sell Your Products on Amazon: A Beginner's Guide