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Entrepreneurs looking for a quick and hassle-free way to start a business on Amazon can always consider dropshipping as a viable strategy. Not only is Amazon one of the largest eCommerce platforms and marketplaces in the world (with over 500 billion dollars in annual revenue in 2022 alone), but it also supports the dropshipping model for anyone who wants to start a business selling products online.
Dropshipping itself has remained a relatively lucrative method of starting an online business. Around 20-30% of all Amazon sellers have adopted a dropshipping model as a side gig and still post a reasonable profit. It’s not complicated to understand either, with five major steps in the process:
The ease of this process (combined with Amazon’s record annual sales trends) makes this business model highly appealing to any new or experienced entrepreneur. And with a little work and some of the best tools on the market to help you, you too can leverage this opportunity for a reasonable profit.
Here’s our comprehensive guide on how to get started with a dropshipping business on Amazon.
As mentioned, Amazon remains one of the most successful platforms for online sales. The process of becoming an Amazon seller is easily accessible to first-time sellers, and the platform itself is built for engagement and sales.
Here are the three major benefits of dropshipping on Amazon:
Amazon maintains a large network of suppliers across the globe, helping dropshipping businesses source goods without the need to look for manufacturers themselves. This allows you to sell a variety of products across different niche markets, spreading out your investments for more profit opportunities.
There’s no need for any long processes for setting up your own Amazon store. A dropshipping business doesn’t require inventory or warehouse space either, only an Amazon Seller Account to start. We’ll discuss the exact steps further in this guide—but essentially, all you need to do is make an Amazon Seller account.
By far the most appealing reason to dropship on Amazon is that it’s easily recognizable—a brand that’s known globally with many possible areas of exposure for your business. The potential customer base that you can build with Amazon is nearly limitless in size if you use the right tools and strategies.
Of course, there are also some drawbacks to the dropshipping model:
Your supplier will handle every part of the product: from manufacturing, packaging, and shipment. You essentially trust that they’ll be quality enough to satisfy your customers.
With dropshipping being so accessible to anyone, competition on Amazon is fierce for anyone looking to start an online business. You need to do your research on the products you want to sell, employ effective marketing strategies, and carefully nurture your customers to remain competitive.
Product selection for Amazon dropshipping is crucial. In theory, as long as you follow the dropshipping rules, you can sell any product permitted by Amazon. But with such a wide range of choices, determining the most profitable products that align with your business goals can be a challenge.
Here are key points to help you with your choice:
You can choose a product that interests you or one that’s already beloved by shoppers. There’s a reason why keeping up with trends is important: you get to capitalize on a product that already has a dedicated audience. With greater interest, your Amazon listing can generate more traffic, and ultimately more sales. Just make sure to choose an on-demand product that aligns with your target audience’s preferences. For example, eco-friendly yarns, made from recycled or natural materials, are slowly gaining popularity. Rather than marketing to a broad audience of crafters, you could specifically target environmentally conscious knitters and crocheters who are interested in sustainable crafting options.
Alternatively, you can choose to market evergreen products or items that are consistently in demand. These items, such as baby bottles, coffee makers, and fitness equipment, are saleable regardless of the season. These types of evergreen products can provide stability to your business.
One of the main criteria for dropshipping product selection is the price range. If your product is low-cost, you need to sell a lot to make good money. If it's expensive, selling just a few can be enough. However, most shoppers are cautious about expensive items, making them harder to sell. Cheaper items might make less per sale, but they are the backbone of Amazon purchases.
Not having an inventory plays to your advantage if you want to market higher-priced items. Essentially, you can list as many high-priced products as you want without having to pay for them.
In addition to the product's actual price, it’s also critical to include your pre- and post-sale services when calculating the cost. This can include answering customer inquiries, handling returns, and securing warranties, which can be costly. Make sure that the profit margins justify these services and choose products with significant markup potential to validate the price range.
Another key criterion is the product’s marketability or how easily and effectively you can promote it. Ideally, your chosen product will perform well across various advertising methods. Aside from using Amazon advertising services to generate traffic to your listing, your product should present well on social media platforms like Facebook, Instagram, and TikTok. Attracting audiences on these platforms can boost your product visibility. As such, it’s valuable for the chosen product to be visually appealing and have a solid value proposition.
Offering free shipping is unlikely if your chosen product is large and heavy. This can be a downer, especially for bargain hunters who prioritize free shipping. Choosing small and lightweight items is often more practical, plus, they can be cheaper to ship. Moreover, small products are often delivered fast, which is an added bonus.
Evaluating the field is crucial to knowing your rivals. High competition can make it challenging for new sellers to gain traction. When there are too many sellers offering the same item, some might drastically lower their prices to become the cheapest option. This strategy can trigger a chain reaction; others will lower their prices to remain competitive, which reduces everyone's profit margins.
On the other hand, competition will push you to rise above the rest. It’ll force you to offer valuable and relevant products, improve your customer service, and up your marketing game.
To set up your Amazon dropshipping product for success, choose an item that isn’t easily found at the local store. Avoid products that you can pick up from the neighborhood hardware or the local supermarket. Specialty items like unique home decor or kitchen gizmos are more likely to be bought online. By choosing a product that isn’t accessible locally, you create a demand that drives potential customers to your online store.
Amazon dropshipping is amazing because you don’t need upfront inventory to make a profit. However, you must be smart about what you want to sell. Not all products are well-suited for this business model. You can experiment with different varieties or capitalize on trends. But whichever product you choose, consider important factors like product demand, profit margins, and competition.
To help you in your selection process, here are product categories that best suit Amazon dropshipping.
The projected global market value of the kitchen and dining market for 2024 is $86.73 billion. This includes kitchenware, food pantries, dining tables, islands, and carts. This boost is driven by people’s desire for functional and convenient kitchen and dining spaces.
As of writing, the top products in this category on Amazon Best Sellers are stainless steel tumblers, meat thermometers, oil bottle dispensers, digital food scales, under-the-sink organizers, and vegetable choppers.
Here are the top products from the kitchen and dining subcategories as per Amazon Best Sellers:
Evergreen products under this category include:
From smartphones to IoT devices, so much of what people do every day relies on electronics. You can sell core electronic items or accessories on Amazon but make sure that your supplier has certifications from the Federal Communications Commission and other applicable agencies.
Mobile protective covers are among the most saleable products in this category. This market is projected to reach a global value of $35 billion by 2027. These covers are great for bundling. You can sell a smartphone case with a power bank and earphones together. Plus, phone cases are lightweight, so they’re not expensive to ship.
Here are other electronic items on Amazon Best Sellers well-suited for dropshipping:
Evergreen products under this category include:
Global retail sales of clothes and shoes will reach an estimated amount of $2 trillion by 2028. Currently, the top Amazon Best Seller products under this category are men’s crew T-shirts, women’s cotton bikini briefs, cork footbed sandals, yoga pants, and bundled socks. Over 7000 6-pack men’s crew T-shirts were sold just last month. That showcases how apparel and footwear create opportunities for Amazon drop shippers. T-shirts are popular for Amazon dropshipping since they’re easy to customize or source from trusted suppliers like AliExpress and Alibaba.
Here are some of the Amazon Best Sellers in this category:
Evergreen products under this category include:
The global market value for cosmetics is projected to reach approximately $760 billion by 2025. This category is in full swing, especially now that mental health and “me time” have become priorities. There’s a growing interest in products that are organic, eco-friendly, vegan, and chemical-free.
Here are the Amazon Best Sellers in this category that you can explore:
Evergreen products under this category include:
The revenue for the pet food market for 2024 is roughly $150 billion. But pet food isn’t the only item you can sell on Amazon. Pet supplies are great for bundling, especially if you’re just starting your Amazon dropshipping business. You can bundle pet bowls, treats, and toys.
Here are Amazon's Best Sellers in the pet supplies category:
These are just the top five categories on Amazon Best Sellers as of writing. You can further explore other products in these top-performing departments:
To thrive in the saturated Amazon marketplace, you need to narrow your product range. We’ve touched upon well-suited products for dropshipping, and the choices are vast. Now, let’s dive deep into high-risk categories that you should avoid, especially when starting your business.
Shipping fragile items can be a nightmare. Delicate, breakable items like glass decors, drinkware, and touch-sensitive electronics take a long time to pack and ship because of the risk of damage. It’s also the reason why shipping them will cost an arm and a leg.
While accessories and gizmos under electronics often grace the Amazon Best Sellers page, electronics, in general, are risky products to sell. They list high in the “high return and refund” category. They also have stringent manufacturer warranties, which are often not aligned with dropshipping flexibility. Electronics also tend to have more unfavorable reviews than other categories, so selling these items may not be the best choice if you want a pristine brand image.
Much like delicate items, shipping furniture can cause stress. Because of its size, furniture pieces have higher packaging and shipping costs. There’s also the potential logistical challenge of transporting huge items. All this can eat into your profit margins and discourage shoppers who are reluctant to pay expensive shipping fees. Furthermore, you need to be fluent in import taxes to ensure compliance.
Like electronics, apparel often ranks high in the Amazon Best Sellers category. However, basic apparel is highly commoditized, and you can easily find it at the local mall. You'd want to avoid competition with physical and online retailers as much as possible. Moreover, common issues like sizing discrepancies and quality concerns can lead to potential customer dissatisfaction.
Trendy items are well and good during their peak season. But, during the off-season, you’ll be in a pickle. If you focus solely on seasonal trends, you’ll have a limited sales window. Even if you don’t need an inventory, a season trend this summer may become obsolete next year, so you’ll still face potential losses.
Moreover, planning for seasonal trends takes some time. You need historical insights and deep knowledge of marketing dynamics to pick which seasonal item to sell during the holidays or BFCM.
Your supplier can make or break your business. Generally, you can choose between a direct manufacturer or a wholesale supplier. As the name implies, a direct manufacturer removes the intermediaries. You’ll directly work with them when a customer places an order. However, direct manufacturers require a large order volume.
On the other hand, working with a wholesale supplier gives you access to a vast product catalog that you can sell competitively. Because they offer lower prices, they typically require a minimum order.
If your supplier provides low-quality products, it’ll be hard to stay competitive on Amazon. If they botch the shipping, you can say goodbye to your customers. For all intents and purposes, choosing the right supplier means choosing a winning product.
So, make sure to allot time exploring and researching suppliers. Make a shortlist. Don’t hesitate to ask them questions and read reviews about them. Furthermore, look into the following:
Online photos can be deceiving, so don’t commit unless you see the item in person. If you can’t visit their store or warehouse personally, order a sample (or two for comparison). The goal is to inspect the product as closely as possible. Check if the item fits its online description and works as intended. Look for any aesthetic flaws, like dents or scratches. You must also inspect the packaging to see if the product is safe during transport. Check the overall product quality and decide if it’s something that will make your customer happy.
One thing that makes online shoppers happy is fast and safe delivery. Examine the shipping standards of your potential supplier. Don’t just focus on the ETA. Check the progress from the moment you place an order. Take notes of the timeline—from packaging to delivery. Examine the cost of shipping and consider the speed of their courier partner to the destination. Ideally, your supplier can start the order process within 24 hours. Unless your product is customized after ordering, any time longer than three days isn’t justified.
Keep in mind that the cheapest supplier isn’t always a good choice. Sometimes, when an item is sold at such a low cost, the quality is inferior. So don’t get swayed by suppliers promising you the lowest wholesale cost in the market. You should look into the cost itself but also include additional expenses like shipping fees, storage, and miscellaneous fees. Some suppliers have hidden fees like membership fees and minimum order requirements. Make sure to ask for all the details to calculate a fair cost comparison.
Much of online retail work is done through technology. Ask your potential suppliers about the tools and apps they use to streamline their processes. Inquire if they let the machines automate things or if personnel oversee certain online-related procedures. Check if their technology can track the status of the order, process payments, and provide a central communication channel.
You need to know what your supplier will do if they send the wrong item or the product gets lost in transit. To your customers, you are responsible for any errors, not your supplier. They don’t know (and don’t really care) about the arrangement you have with your supplier. Apologizing and saying it’s your supplier’s fault can only do so much. Therefore, you have to make sure your chosen partner has accountability. Talk about returns, refunds, and insurance.
Choosing a supplier is a big decision. The first step in ensuring you partner with a good one is communication. Set up an appointment—in person or virtual—to discuss the business properly.
So what are the steps you need to follow to start your dropshipping business on Amazon? Fortunately, Amazon has streamlined the entire process needed to set up a shop. Their online portal for sellers has all the resources you need to get started.
But if you need a quick reference on what to expect, we’ll be outlining the specific actions you need to take.
An Amazon Seller Account is the bare minimum that you need to get started on Amazon. You’ll need to put information like your contact information, the details of your dropshipping business, packaging centers, and other financial obligations like tax information.
A question that many sellers often ask is: should I go with an individual or professional Seller Account? The answer is ultimately up to you since the added fees can be a bit much if you’re just starting out. A good rule of thumb is that the more products you’re selling, the better it is to get a professional account—at least to the point where the profit margins swing in your favor.
Not all products can go on Amazon’s platform without approval. Physical items like fine art, jewelry, and other goods all need approval before you can put them in your Amazon store. This is necessary to make sure that your store passes quality control and is compliant with all regulatory requirements.
Products that don’t require approval are mostly home and kitchen products, electronics, or books. You can put these on your Amazon store without applying for approval. Amazon also has a list of restricted or banned goods that can’t be sold at all. Make sure to check this list regularly so that your store stays compliant.
When you add a product to your Amazon storefront, you need to make sure that the listing falls under Amazon’s dropshipping category. Brands that produce their own products will need to acquire a UPC (or Universal Product Code) before they can be indexed by the Amazon algorithm.
Dropshippers don’t have to do this. All you need to do is to select a product that you want to sell and publish the details from there. Keep in mind that Amazon has millions of possible products available for dropshipping, so make sure you do your research on which ones you want to sell.
Amazon also supports cross-linking products and storefronts across some eCommerce platforms. One of the more popular options is Shopify—mainly because the Shopify platform itself already makes the linking process easier. All you need to do is to link your Amazon store to Shopify’s Sales Channels.
Linking other eCommerce sites will allow you to sync inventory, increase the visibility of your products, and otherwise cross-promote without having to invest too much time and effort. You also get access to tools that other eCommerce websites have, which can allow you to manage your storefront easier.
Technically, dropshipping as a business model isn’t exclusive to Amazon; plenty of other eCommerce sites allow for this practice. However, Amazon arguably has some stricter requirements for sellers who want to dropship on their platform.
There are several rules you need to follow to make sure that your dropshipping business is Amazon-compliant, such as:
This covers everything from packaging slips, shipping manifests, receipts, and customer records: anything related to the product must explicitly identify you as the only seller. This is so your customers—and by extension, Amazon itself—don’t run into any confusion about who needs to be held accountable if something goes wrong.
While you can dropship almost any product on the Amazon platform, you cannot dropship a product that’s already on Amazon that’s being sold by another business, company, or brand. While this can be a way to help manage inventories and customer expectations, it’s also Amazon’s way to stop sellers from artificially affecting prices.
It’s not always possible to get dropshipped products with a completely clean slate—a good example would be some white-label products—so it’s your responsibility to remove any of these identifiers before your product reaches your customers. Again, this is to ensure that there’s only one person that both they or Amazon can consult in case of complications.
Because dropshipping already takes place outside of Amazon’s distribution centers, it falls to you to handle any customer complaints or returns. Remember that none of your products have been handled by Amazon at any point in time between purchase, sale, and delivery. This makes you (or sometimes your supplier) the sole entity liable for any customer concerns.
The Amazon BSA outlines all the responsibilities you must follow as a seller on the Amazon platform. More importantly, it also contains the different liabilities you and Amazon have for as long as you sell on the platform. There may also be other policies that can apply to your business depending on what you sell or where you are located, which you need to follow as well.
Failure to comply with any of the rules above can result in heavy penalties from Amazon and a possible suspension or revocation of your selling privileges on the platform. Fortunately, some tools make compliance easier, such as SellerRunning’s crowdsourced common pool of products. With this information, you can see which products are likely to be non-compliant and avoid selling them.
One possible way to help you make up your mind about the best products to dropship is to look at which products perform well on retail arbitrage. We’ve talked about retail arbitrage on Amazon before, but the gist of it is that you look for products that you can source from retailers and then sell them on Amazon for profit.
For dropshipping businesses, looking at retail arbitrage is a great way to figure out which suppliers are in-demand enough to partner with for a dropshipping arrangement. It’s also far less costly since you eliminate the middleman of buying from the retailers and partner straight with the supplier themselves.
Tools like SellerRunning can make this process far easier. The platform has an extension tool that allows you to search and find 100s of profitable products in seconds. The extension runs a search on Amazon.com and lets your dropship these products in 16 Amazon marketplaces such as Amazon Canada, UK, Mexico, Italy, UAE and etc.
With the SellerRunning you can also ensure you are outdoing your competition and winning the BuyBox, which is the easiest way to increase sales on Amazon.
And even once you’ve formally begun your dropshipping model, SellerRunning can still help your business grow by allowing you to expand to new marketplaces and take care of the order fulfillment for you with the help of SellerRunning Warehouse.
With a cloud-based infrastructure and beginner-friendly design, SellerRunning promises to be one of the essential tools that any dropshipping business can use to start, scale, and maintain its operations. SellerRunning covers all stages that any dropshippers needs: finding right products, creating product listings in seconds, ensuring competitive pricing strategy and increasing BuyBox wins and lastly managing product delivery to the end customer and customer campaign management.
Dropshipping on Amazon needs to be done carefully to avoid pitfalls and generate profits. Here are some tips you can keep in mind when you’re trying to increase your sales:
Dropshipping on Amazon is even easier when you take advantage of the many tools and software that can help with managing and growing your business. All these tools give you data—data that you can use to grow your business, avoid making bad decisions, and overall increase your profits.
Aside from being the hub for your entire business on Amazon, Seller Central has all the basic features you need to manage your business day-to-day. It’s where you’ll communicate with your customers, keep track of your inventory, and acquire orders that you’ll pass on to your suppliers.
More importantly, it’s also the best place to reach Amazon’s support team. Dropshipping on Amazon is largely self-contained: if you follow all of Amazon’s policies you shouldn’t have any issues. But if you do run into issues with your storefront, the best way to get help for it is through Amazon Seller Central.
Threecolts is another tool that helps you optimize your Amazon business by giving you useful insights into how your products are performing. This is crucial to evaluating your overall market performance and whether you need to adjust your selling strategy.
It also helps organize your inventory better with a streamlined inventory management system. This allows you to stay on top of your inventory status at any time, allowing you to respond to customer demand without too much delay. This improves your customer experience overall—arguably one of the most important parts of an Amazon store.
If you’re looking for possible products to dropship on Amazon, Viral Launch is a good choice. Its suite of features is geared toward increasing your product’s profitability, especially when you’re about to launch your products. You can optimize your listings, analyze competitors, and much more.
This is especially useful if you’re just in the planning stage of your dropshipping business. You’ll need all the data you can get to launch your products successfully. The more data you have about your products, the more you’ll be able to plan around their marketing and sales.
An important part of running your Amazon dropshipping business is customer relationship management. FeedbackWhiz simplifies this process by giving you an easy way to engage with customers and their feedback, improving your reputation on Amazon and building a loyal customer base.
Being trusted by your customers is what allows you to scale your business and ultimately generate more profit, and listening to their feedback is an essential step. By improving your impressions, you ultimately become a more appealing choice for long-term and first-time customers.
All these tools can help turbocharge your performance on Amazon, especially as a dropshipping business. With the proper use of the data they provide and integrating your performance in future marketing and sales strategies, you can turn great profits with your business.
We hope this guide has helped set your expectations on how to get started with a dropshipping business on Amazon and given you concrete goals to work toward success. If you’re looking to kickstart your dropshipping operations, especially when it comes to fulfillment, sign up for SellerRunning today.
Browse through and read our other blog posts that are data-driven insights with our very own proprietary data and learn more on Mother's Day trends and best practices, Easter sales, price elasticity of demand, Amazon FBA fee changes, Amazon product title optimization, winter seasonal products, Amazon end of year sales, Valentine’s Day trends and best Amazon fulfillment centers by location and throughput.
Threecolts is a comprehensive suite of advanced ecommerce software solutions. We're designed to empower retail vendors and marketplace sellers on Amazon, Walmart, and beyond. Our tools optimize every aspect of ecommerce operations to ensure maximum profitability.
For sellers aiming to earn through reselling, Tactical Arbitrage helps you find hidden deals 5X faster. ScoutIQ provides instant insights for scoring in stores. DataSpark helps you get your next bestseller on Walmart Marketplace across over 14 million products in its database.
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