How To Start A Dropshipping Business on Amazon Step by Step in 2022
Updated · Apr 06, 2022
Dropshipping is an easy and efficient way to get into ecommerce, you just need to know how to go about it. In this article, we’ll cover how to do it on Amazon with some practical tips.
While dropshipping on Amazon is a little different than other ecommerce platforms, it’s just as profitable.
What is Dropshipping?
Dropshipping is a type of ecommerce, where instead of stocking products and selling them, you find a supplier who will ship directly to your customers, essentially making you the midway point, or “retailer” between consumers and suppliers.
It has all the benefits of running an ecommerce store, without having to worry about the costs and effort involved in manufacturing and shipping.
A Step by Step Guide to Dropshipping Through Amazon
Now that you know what drop shipping is in brief, let’s find out how to start a dropshipping business on Amazon.
Create an Amazon Seller Account
First, you need to sign up for an Amazon seller account. This is different than a regular Amazon shopper account - you'll need to provide some additional information about your business and yourself.
So how much does it cost to dropship on Amazon? There are two plans available—Individual and Professional.
The Individual Plan will cost you $0.99 per product sold, along with additional listing fees. It doesn’t allow for advertising and is limited to 40 items a month.
We recommended you start with this one while you’re figuring out what products you’ll be selling and testing. When your plan is set, you can move on to the Professional Plan.
The Professional Plan costs $39.99 per month and allows for use of Amazon’s extended tools such as onsite advertising and greater control of shipping costs.
The next step is to find the right products to dropship. You can do this by researching keywords, and by looking at common items being sold on Amazon itself.
Keywords are helpful because they can narrow down what people are looking for, especially if they’re long tale.
For example, you may notice people are searching for “phone case waterproof card holder” or “insulated coffee mug with lid”. Now you have a very specific idea of what people are looking for.
Once you've found a few potential products, it's time to find a supplier.
Find a Supplier
Naturally, you need to find a dropship supplier that carries the products you want to sell.
There are a few different ways to do this, but the easiest is to check out some roundups like this one from Oberlo. Once you've found some suppliers, you can contact them and set up an account. You’ll want to test a few before you decide on one.
The supplier must be able to list you as the seller of the products on packaging. This is important and will be touched on again later.
Test the Products
Order a few of the products you want to sell so you can get a hands-on look at them. Get the same product from multiple dropship suppliers. This will give you an idea of the quality. By looking at this, and comparing the prices of various sellers, you can decide on what to sell.
Then you can test how they may sell by creating a small test batch of each product. Order a few units of each product from your selected supplier, and then list them for sale on Amazon. Be sure to set your prices competitively, and keep an eye on your listing's keywords to make sure that potential customers can find your products easily.
Once you've sold a few units of each product, it's time to evaluate your results and decide on how to Amazon dropship. Look at your sales numbers, and compare them to your advertising and shipping costs.
If you're making a profit on each sale, then you know you've found a winning product! If not, it's time to move on to the next potential product.
When pricing your product, you need to factor in all of the costs involved in making and selling it, as well as any potential costs that could arise. You also need to be aware of what your competitors are charging, so that you can stay competitive.
Now that you have an Amazon seller account, some dropshipping suppliers, and your price list, it's time to start listing products.
You'll need to create a listing for each product you want to sell, and include information like the price, pictures, and descriptions. Once you've created your listings, you can start promoting them on social media or other channels.
In terms of fulling out your listings, you can find generic photos and descriptions, but for the best results in your Amazon dropshipping business, we recommend taking your own photos and writing your own descriptions.
Your personal flare can help the products stand out, and SEO in your descriptions can boost the rank of your products.
Take Care of Legalities
As an Amazon seller, you’re a business, and so need to take care of all the legalities associated with a business.
This includes creating your business structure where you can choose to be a sole proprietor, partnership, limited liability company (LLC), or corporation. Once you have decided on your structure, you will need to register your business with your state.
The next legal step is to set up banking for your Amazon dropshipping business. You will need to obtain a Taxpayer Identification Number (TIN) from the IRS. This can be done by completing an application for an Employer Identification Number (EIN). Once you have your EIN, you can open a business bank account.
Finally, you need to be aware of tax regulations. You will need to obtain a business license and pay taxes on your income. It is important to research the tax laws in your state so that you are compliant.
Taking care of these legalities may seem daunting, but it is necessary in order to run a successful business. Amazon requires that all businesses selling on their platform are registered and in compliance with tax laws.
A Warning Against Dropshipping Arbitrage
Arbitrage is where you source a product from another retailer, instead of a supplier, and sell it for a profit.
Amazon has no strict rule against arbitrage. However, to run an Amazon dropshipping business, you must be listed as the seller of your products, and that must be reflected on the packaging and documentation your customers receive.
Forwarding an item from a retailer like Target or GameStop will have them listed as the seller, and their branding on the package.
As such we recommend against arbitrage. It’s a whole different process to what we’ve described above, and if done incorrectly, could cause trouble for you with Amazon.
Focus on Your Brand and Customer Service
Finally, take advantage of the free time dropshipping with Amazon gives you by focusing on your brand awareness and customer service.
As you’ll be selling generic products, you need to make your brand stand out. This can be done through catchy adverts, competitive pricing, and excellent customer service.
On that note make sure you do everything to give your customers a good experience. No matter what they need, deal with it to the best of your abilities. This will increase the likelihood of them buying from you again.
Returns, while disappointing, are a good way to do this. A smooth return process is likely to create a grateful customer, increase trust, and see them shop with you again.
Now you know how to start a dropshipping business on Amazon. It’s definitely one of the easier types of ecommerce, but like anything worth doing, it’ll require some effort, research, and planning.
Take advantage of its scalability to grow, and remember that you don’t have to dropship forever. You can use it as an intro to ecommerce, and later when you’ve built up the capital and experience, you can move onto more complicated, but more lucrative types of online selling.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.