The Best States for Small Business (2024 Guide)
Discover the best states for small businesses, featuring insights on tax benefits, resources, and thriving markets to help your venture succeed.
Amazon Dropshipping Guide (Steps, Tips, Suppliers, Ecommerce Sites)
Starting an Amazon dropshipping business is a proven way to tap into the e-commerce giant's $514 billion revenue stream.¹ If you want to start dropshipping on Amazon, this guide can be your roadmap.
This article lays out the crucial steps, effective strategies, and necessary resources. You’ll also learn how to streamline dropshipping payments using Wise Business. So why wait? Begin your Amazon dropshipping venture today and explore the potential of this lucrative ecommerce opportunity.
Receive Amazon payments
like a local >>
Trustpilot Rating: Excellent¹⁰ with 190,000+ reviews
No minimum balance required and no monthly fees
Wise is a popular method for Amazon businesses to get paid and save along the way
What is Amazon dropshipping? How does it work?
Amazon dropshipping is a business model where you sell products without having them in stock. Instead, you buy the product from a third party, like a manufacturer or wholesaler. They ship the product directly to the customer. This way, you don't have to handle the product yourself.
How Does It Work?
The Amazon dropshipping process involves three main parties: you, the manufacturer, and the customer. Here's a simple breakdown of how dropship selling on Amazon works:
- List products: You list products on your Amazon dropshipping account. A third party owns the products, but they appear as your inventory.
- Receive orders: A customer orders a product. You get a notification.
- Order from supplier: You order the same product from your supplier. You pay the wholesale price.
- Supplier ships product: The supplier sends the product directly to the customer. Your role ends after you place the order with the supplier.
- Customer receives the product: The customer gets the product. They think it came directly from you, not knowing about the supplier.
The Amazon dropshipping model is low-risk. You don't have to buy inventory upfront. You also don't need space to store products. That makes starting a dropshipping business on Amazon easier. You can launch an ecommerce store without having physical stock. This approach makes dropshipping Amazon products a popular choice for many sellers.
| Don't Pay Excess Fees! Use Wise Business for Amazon and Get Paid Like a Local |
|---|
| Receive money from around the world in 9 major global currencies, at the speed and cost of local payments. Get account details to receive USD, GBP, EUR and more and start getting paid like a local. |
| Wise helps Amazon businesses receive payments by simply adding their account details to their account |
| Most importantly, if you're sending international mass payouts, then Wise could help. We offer the mid-market exchange and transparent costs, which has attracted over 16 million users to hold, receive, and send money with Wise and save along the way |
Is Amazon dropshipping profitable? How much money can you make?
Amazon dropshipping can be profitable, attracting entrepreneurs worldwide with its promising revenue model. However, as with any business, your money depends on several factors, such as the products you choose to sell, their selling price, your marketing strategy, and how effectively you manage your costs.
How do you make money with an Amazon dropshipping business?
Making a profit in an Amazon dropshipping business comes from the difference between the product's wholesale cost and the retail price you set. To illustrate, consider this simplified example:
- Set retail price: You list a Bluetooth speaker on your Amazon dropshipping account. The speaker's wholesale cost from the supplier is $20, but you set the retail price at $50.
- Customer buys the product: The customer orders the speaker at your retail price of $50. This amount goes into your account.
- Order from supplier: You order the same speaker from your supplier at the lower wholesale price of $20.
- Keep the difference: The supplier ships the product directly to the customer, and you keep the difference between the retail price ($50) and the wholesale price ($20), which in this case, is $30.
This example presents a simplified view of the earnings. Realistically, you will also need to account for costs like marketing and Amazon's fees, which we will explore in subsequent sections.
See the Best Banks for Small Businesses >>
Factors That Influence Profitability
Several factors can influence how much you earn from your Amazon dropshipping business. These include:
- Product selection: Items with high demand and low competition can help maximize your profits. It's essential to conduct thorough market research to identify such opportunities.
- Pricing strategy: Your profit margin depends on how you price your products. Competitive pricing, coupled with quality assurance, can help attract more customers.
- Marketing and promotion: Effective marketing and promotion strategies can increase your product visibility, leading to higher sales.
- Cost management: Efficiently managing costs, such as Amazon's selling fees, shipping costs, and any returns, is crucial to maintain profitability.
How much money can you make?
You can profit 10% to 30% on each sale in a dropshipping business.² This can mean earning up to $100,000 a year. This is about $1,000 to $5,000 in monthly income. But remember, you'll need to pay for things like the product, dropshipping fees, website costs, and marketing.
Usually, selling expensive, high-quality products gives you a higher profit per sale. But you might sell fewer items. So, it's a balance. You need to consider your product's price and how many people want to buy it. Before choosing a product and a supplier, plan. Look at how much demand there is for different products. This way, you can estimate how much you'll sell and earn.
How to dropship on Amazon?
Starting a dropshipping business on Amazon may seem daunting to beginners. However, with the right guidance and a clear understanding of the process, it can become a straightforward and profitable venture.
The steps outlined below will walk you through everything from Amazon's basic requirements to choosing the right products to sell, making it easier to navigate the realm of Amazon dropshipping.
Can you dropship on Amazon?
Dropshipping on Amazon is indeed possible, but there are basic rules you must follow. Amazon dropshipping policy sets these guidelines, and breaching them could lead to losing your ability to sell on the platform. Here's a simplified breakdown of Amazon's dropshipping policy³:
- Seller identification: Amazon requires you to identify yourself as the seller of your products. This means your name or business must be on the invoices, packing slips, and external packaging. For example, if 'John's Electronics' is your store name, this should be the name on these documents, not the name of your supplier.
- No third-party details: You should never include details about your suppliers, wholesalers, or manufacturers in your Amazon product descriptions or any product packaging materials. In other words, if you're selling a smartwatch sourced from 'TechWholesale,' the customer shouldn't see this name anywhere – neither in the product description on your Amazon dropshipping store nor the smartwatch packaging they receive.
- Return handling: Amazon's policy clearly states that the seller (you) is responsible for accepting and processing returns. For instance, if a customer wants to return the smartwatch they purchased from 'John's Electronics,' it's your responsibility to facilitate the return process.
- Compliance with Amazon's terms of service: Lastly, you must comply with all the terms in Amazon's seller agreement. This agreement covers various aspects of selling on Amazon, including listing items, maintaining inventory, order fulfillment, customer service, and more.
Amazon enforces these rules strictly. Failing to comply can result in penalties, including suspension or even termination of your Amazon dropship account. Therefore, understanding and adhering to these basic requirements is crucial when starting a dropshipping business on Amazon.
Where does the customer make an order?
When dropshipping on Amazon, customers make purchases directly on the Amazon platform. The process typically involves the following steps:
- A customer makes an order: Customers visit your Amazon store and purchase the products they desire.
- Order details to a supplier: As the seller, you forward the customer's order details to your dropshipping supplier.
- The supplier ships the product: Your dropshipping supplier is responsible for packing and shipping the product directly to the customer. However, any branding or documentation should only include your business information, not the supplier's.
Do you have an eCommerce store?
While having an independent ecommerce store isn't a requirement for Amazon dropshipping, there are advantages to maintaining one:
- Brand identity: A unique ecommerce site allows you to establish and nurture a strong brand identity.
- Product variety: With an ecommerce store, you can offer a broader range of products beyond what you list on Amazon.
- Customer relationships: Owning an ecommerce site gives you more control over customer relationships, offering opportunities for direct marketing and personalized customer service.
How much does it cost to start dropshipping on Amazon?
When starting an Amazon dropship store, various costs are involved. These costs can be categorized into four main sections: selling plans, referral fees, fulfillment fees, and other potential costs.⁴
Selling Plans
Amazon's two main selling plans, Individual and Professional, cater to different selling needs and volumes. Here's a brief overview:
Individual Plan
- Cost: $0.99 per item sold, plus additional selling fees.⁵
- Ideal for: Sellers who move fewer than 40 units a month or are still deciding what products to sell.
- Benefits: This plan benefits those starting out or those with a smaller volume of sales. It allows sellers to pay per item sold, which can help manage costs as a business gets off the ground.
Professional Plan
- Cost: $39.99 per month, plus additional selling fees.⁵
- Ideal for: Sellers who move more than 40 units a month, those who wish to advertise their products, or sellers desiring to use advanced selling tools or sell products in restricted categories.
- Benefits: The Professional plan offers several advantages. Sellers have access to advanced selling tools, including APIs and reports, which can help optimize business operations. Additionally, sellers on this plan qualify for top placement on product detail pages, increasing product visibility and potential sales. This plan quickly pays for businesses planning on selling more than 40 units a month.
Referral Fees
Amazon imposes a referral fee for each item sold from your Amazon dropshipping store. The fee amount varies depending on the product category, with most referral fees falling between 8% and 15% of the price. For most categories, Amazon charges a minimum referral fee of $0.30.⁶
Referral fees for some popular product categories are as follows:
| Product Category | Referral Fees |
|---|---|
| Appliances | 8% - 15% (depending on size) |
| Baby Products | 8% (if the total sales price is $10 or less) 15% (if the total sales price is higher than $10) |
| Backpacks, Handbags, and Luggage | 15% |
| Consumer Electronics | 8% |
| Footwear | 15% |
| Home and Kitchen | 15% |
| Toys and Games | 15% |
Fulfillment Fees
Regarding shipping orders, costs vary significantly depending on whether you handle fulfillment in-house or leverage Amazon's Fulfillment by Amazon (FBA) service.
With the FBA model, Amazon handles your products' storage, packaging, and shipping. This takes a considerable load off the seller's shoulders but comes with associated fees. Amazon calculates these fees based on each product's size tier, dimensions, unit weight, and shipping weight range.⁷
For instance, small standard-size items (like a paperback book) might cost less to fulfill than larger, heavier items (like a home appliance). That's why it's essential to accurately estimate your products' size, weight, and shipping needs to calculate potential fulfillment fees effectively.
Other Costs
Planning an Amazon dropshipping business means you need to think about all possible costs. Some other charges you may face include⁸:
- Inventory fees: These are charges for storing items in Amazon's warehouses.
- Rental book service fees: Fees charged if you plan to sell rental books.
- High-volume listing fees: More fees might come into play if you list many products.
- Refund administration fee: Amazon charges a fee for dealing with customer refunds.
Also, there are optional programs from Amazon that can help boost sales. These include advertising or special account services.
Do market research
Before starting your Amazon dropshipping business, conducting thorough market research is crucial. This step will help you understand the market, identify profitable products, and gauge competition levels. Here are some key points to consider:
- Identify popular products and niches: Use tools such as Google Trends, Amazon's Best Sellers list, or keyword research tools like Jungle Scout to identify popular products in high demand. For example, you might find that "organic dog food" is a trending product in the pet supplies category.
- Understand your competition: Investigate who your potential competitors would be. Look at their product listings, prices, customer reviews, and overall store performance. For this task, you can use tools like AMZScout or Helium 10 Amazon dropshipping app.
- Assess profit margins: Once you've shortlisted potential products, calculate the possible profit margins. Remember to factor in all costs, including Amazon fees and shipping costs. This will help you determine whether a product is worth selling.
- Customer demand: Use tools such as SEMRush or Google Keyword Planner to understand how often people search for your potential product. High search volume usually indicates high demand.
Define a clear Amazon dropshipping business plan
Your business plan serves as a roadmap, detailing the course of your business from the start-up phase through the establishment and growth phase.
In your plan, outline your business objectives, target market, and competition. Detail your sourcing and fulfillment strategy, marketing plan, and financial projections. This can include potential sales, profits, and other costs.
Also, consider potential challenges and strategies for overcoming them. A well-structured business plan will guide your operations and be vital if you seek external funding or partnerships.
Get an Amazon seller account
You must create an Amazon Seller account to begin your Amazon dropshipping journey. This platform becomes the hub for listing and selling your products. Depending on your business size and the features you're after, you can opt for either an Individual Seller or a Professional Seller account.
To create an account, you must share basic information about your business, such as the business name, address, and tax details. Notably, Amazon requires a bank account for sending your sales payments.⁹ Consider opening a Wise Business account for this purpose. As an international account, it simplifies global transactions, which can be a significant benefit if you're dealing with international suppliers or customers.
Finally, be sure to review and comprehend Amazon's selling policies. Adherence to these guidelines is crucial to avoid future complications or account suspension.
Receive Amazon payments
like a local >>
Trustpilot Rating: Excellent¹⁰ with 190,000+ reviews
No minimum balance required and no monthly fees
Wise is a popular method for Amazon businesses to get paid and save along the way
Adding your Wise Account Details to Amazon
| Setting up Wise account details on Amazon |
|---|
| 1. Click Settings > Account Info > Payment Info > Bank Account Info |
| 2. Add or replace bank details. If you’re replacing existing bank account details, select Replace. If you’re adding new bank account details, select Assign |
| 3. Select Add new deposit method |
| 5. Add your bank account details |
| 6. Amazon US: Add your account number and routing number (ACH if you have 2) to receive electronic payments only (Click here for other locales) |
| 7. Verify your bank account details. This is the account number you used when initially setting up your Amazon seller account |
| 8. Save your details. You can do this by clicking Set deposit method |
| 9. All set. Now you can withdraw your earnings into your Wise account |
| Most importantly, if you're sending international mass payouts, then Wise could help. We offer the mid-market exchange and transparent costs, which has attracted over 16 million users to hold, receive, and send money with Wise and save along the way |
Select items to sell on Amazon
Finding the correct products is crucial for a profitable Amazon dropshipping business. Here's a quick guide to product selection:
- Find items with high demand and reasonable profit margins.
- Consider shipping costs, influenced by product weight and size.
- Assess the competition in your chosen market.
- Verify supplier reliability and product quality.
Tools like Jungle Scout or Helium 10 can offer valuable market insights during this process.
Examples of items to dropship on Amazon
Due to their practicality and demand, some categories perform well in the dropshipping model. Ideal items are compact, lightweight, and durable, making shipping less costly and risky. Here are a few examples:
- Electronic accessories: phone cases, screen protectors, chargers.
- Fitness equipment: resistance bands, yoga mats, foam rollers.
- Leisure items: board games, puzzles, craft kits.
Aligning your product selection with your business goals and target audience will yield the best results.
Create a product listing on Amazon
There are some essential steps when creating a compelling product listing on Amazon. It starts with adding a product to your seller account, after which:
- The product title should be compelling, including essential details such as brand, product type, and distinctive features.
- Detailed product descriptions should outline product specifications, benefits, and features.
- Images of the product should be clear, high quality, and accurate to provide a realistic product understanding.
- Relevant keywords should be utilized to improve your product's visibility in Amazon search results.
A well-optimized listing is key to convincing customers to purchase your dropshipped products. Whether you are dropshipping directly on Amazon or dropshipping from Amazon to Shopify, a robust product listing is vital.
Market your products
To stand out in Amazon's extensive marketplace, adopt dynamic marketing strategies. Consider the following tactics:
- Sponsored product ads
- Social media marketing
- Email marketing
- Customer reviews
Forward customer orders to dropshipper
When a customer orders a product, you must let your supplier know. Some sellers do this by hand. But a quicker way is to use an automated system. This can send orders straight from Amazon to your dropshipper. The supplier then gets the product ready and sends it to the customer.
Take your dropshipping business global
With Amazon's vast global reach, you can expand your dropshipping business internationally. Utilize Amazon's global marketplaces and Fulfillment by Amazon (FBA) to reach customers worldwide, remembering to comply with each marketplace's specific policies and regulations.
Additional Step: Putting your Amazon dropshipping business up for sale
You might consider selling if you've built a successful Amazon dropshipping business. Websites like Empire Flippers or Flippa allow you to list and sell online businesses, providing an additional avenue for profit from your venture. Always ensure you've prepared all necessary financial statements and business details for potential buyers.
Important Note: Amazon dropshipping suppliers
Choosing the right supplier is critical in a dropshipping business. Your supplier's reliability and quality of products directly affect your reputation on Amazon. Thoroughly vet suppliers before partnering with them. Look for suppliers with a track record of timely delivery, high-quality products, and excellent customer service.
Just as selecting the right supplier, having the right tools at your disposal can ease the process. For example, a Wise Business account can simplify payment and money management, mainly if you deal with international suppliers.
As you've seen, launching a dropshipping business on Amazon requires careful planning and strategic steps. However, you can successfully start dropshipping on Amazon with dedication, a solid business plan, and the right resources. To ease your financial processes in your dropshipping journey, consider signing up for a Wise Business account today.
The Wise Business Account for Amazon Dropshipping
To wrap things up, let’s explore a smart and efficient way to get your Amazon funds right into your account – using Wise Business.
Many Amazon sellers globally vouch for Wise and its transparent, low fees, and ability to receive funds in over 9 currencies. You’re also getting a seamless way to hold funds in over 40 currencies and can make transfers between them all at the mid-market exchange rate, maximizing your returns.
Add in accounting integrations and other handy features, and you can see why Wise Business might just be an Amazon seller’s best friend! So, as you start your Amazon store business, make the best financial decision and sign up for Wise Business.
Receive Amazon payments
like a local >>
| Some other features Wise Business users love |
|---|
| Account Software Integration: QuickBooks, Xero, Sage, and Wave |
| Batch payments offer the chance to send up to 1000 invoices in a single click |
| The Most International Account: Hold 40+ currencies at once |
| Transparency: Wise Business is trying to get rid of all your business account fees |
| The Wise API gives businesses the chance to automate and schedule mass payments |
| Most importantly, if you're sending international mass payouts, then Wise could help. We offer the mid-market exchange and transparent costs, which has attracted over 16 million users to hold, receive, and send money with Wise and save along the way |
Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks.
Sources used:
- Statista | Annual net sales revenue of Amazon from 2004 to 2022
- Shopify | What is Amazon Dropshipping?
- Amazon | How To Dropship on Amazon
- Amazon | Pricing
- Amazon | Pricing - Selling Plans
- Amazon | Pricing - Category Referral Fees
- Amazon | Pricing - Estimate Your FBA Fees
- Amazon | Pricing - Other Costs
- Wise | How Do I Receive Money From Amazon with Wise?
- Trustpilot
Sources last checked on 4-August 2023.
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
Money without borders
Find out more
What is a Multi-currency Wallet? (Quick Guide)
Discover the convenience of a multi-currency wallet that allows your business to manage, exchange, and hold various currencies securely in one place.
How to Start an LLC in North Carolina: A Comprehensive Guide
Learn how to start an LLC in North Carolina with our step-by-step guide. Discover the benefits, requirements, and costs associated.
Best State To Form An LLC: Comprehensive Comparison and Guide (2024)
Looking for the best state to form an LLC? Let's learn about the top states and the key factors that make them a good place to do business.
How to Set up a Local Entity: Step-by-Step Guide for Businesses
Learn how to set up a local entity for your business with this easy-to-follow guide, covering legal requirements, registration, and more.
How to Start an LLC in Delaware | 2024
Looking to learn how to start an LLC in Delaware? Let's get into the steps, costs, and tips that you need to succeed.
