A question that is asked time after time again. Is Amazon dropshipping profitable, even in 2021?
Understandably, any online entrepreneur would want to attempt Amazon dropshipping. It was estimated that in one month during 2020 the site saw over 570 million visits.
Yes, you heard that correctly. Let’s not forget the 125.56 billion U.S dollars they made in the last quarter of 2020.
It’s very clear that Amazon is doing well through its marketplace. Which is great news for those who are selling successfully on it.
But, can Amazon dropshipping be profitable?
Going on the statistics above, it most certainly can be profitable in 2021. But only if you do it right and follow Amazon’s guidelines. Remember, Amazon is known for its fast and prompt delivery services and therefore choosing a reliable supplier should be the main priority.
To become profitable in Amazon dropshipping you must do the following;
- Find a reliable supplier that you can trust (fast deliveries is a must).
- Understand the rules behind Amazon dropshipping.
- Know the costs and fees associated with having an Amazon seller’s account.
- Have knowledge of how the sales “engine” of Amazon works.
- Find products that are trending and popular, but low competition.
Once you’ve covered these bases, you’ll be ready to start listing your first profitable product on Amazon. Keep in mind, this takes time and isn’t an “overnight” successful business model.
Through this article, we’ll be diving deeper into the world of dropshipping on Amazon and cover some of the “must-knows” before leaping into this business venture.
Things You Must Know Before Dropshipping on Amazon
As mentioned above, Amazon allows you to dropship on their marketplace. But only under their tough rules, sticking to these rules are vital and not doing so will result in you getting banned immediately.
Seller records – For you to be considered a “reliable” seller in Amazon’s eyes, you must always be the seller of records for your products. This means being the identified seller of products to the consumer.
Identification – When dropshipping goods from your suppliers to the buyers, you need to have the correct identification. The packing slips, invoices and further information required about your products must relate to your Amazon seller’s account.
Suppliers – It is crucial to find a supplier that will remove all of their information that declares them as the third-party seller. Any external packaging, packing slips, or anything close to that matter, needs to be removed before its sent to the consumer.
Returns – If you haven’t got a proper return procedure in place, you need to get one. Amazon expects you to take full responsibility for product returns.
Tracking numbers – Amazon is known for its customer experience and being super easy to gain insights into your delivery. Having reliable tracking numbers is a must and Amazon will flag false or miss-typed tracking numbers, doing this will result in a late shipment and can cause negative effects on your product rankings.
Sellers policy – Take time to completely understand Amazon’s seller’s policies. Having a full understanding of this agreement will save you a ton of time and headaches.
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The Factors That Affect the Profitbility of Amazon Dropshipping
An important aspect of becoming a profitable dropshipper on Amazon is to understand the cost of being a seller in this marketplace.
These expenses along with the revenue that you generate needs to be analyzed in order to understand if this business is profitble or not.
Here are some of the factors that affects the profitablity of this business.
The Product that you choose from your suppliers needs to be affordable and must be a good product so that you can price it accordingly and make some good margins with it.
If it ends up being a bad product, not only will receive more refunds and returns but also you will end up receiving so many bad reviews which will surely affect your credibility in this business.
So make sure that the product is of high quality, affordable, and can be priced in a way that it looks affordable to the customers.
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Like most marketplaces similar to Amazon, they charge a fee per product sold and also a monthly or per item subscription.
Let’s start with the monthly or per item subscription fee.
Amazon currently holds two plans for becoming a member on their platform, these are an individual plan and a professional plan.
The individual plan is a great place to start for new dropshippers and they will charge $0.99 per unit sold.
However, the professional plan is a flat fee of $39.99 per month no matter how many products you sell. If you sell more than 40 items a month, this is something you can look into.
Next, is the fee they charge per sale. All online marketplaces have a fee and this is how they make their money. The fee depends on the item category but as a whole, you are looking at around 10-15 per cent per item.
As a dropshipper, you’ll already be on razor-thin margins to compete with other sellers. Typically, most drop shippers work around a 30% – 50% margin.
If you want to be successful in this, especially if you are very new to the platform, you will need to market your product and bring in as many people as you can.
In order to do this, you will need some money. The most common way people market is by using Amazon’s PPC ads.
You could also use other methods like Influencer marketing, Google ads, Facebook ads, etc.
So, in general, if you can somehow find a good, reliable product which can be priced profitably and market it at a cheap rate, you could surely be profitable.
Related Article – What Is The Average Profit Margin For a Dropshipping Business?
Advantages and Disadvantages of Amazon Dropshipping
You’re now aware that Amazon dropshipping can be profitable if done correctly. But like most things, there are a ton of advantages and disadvantages of being an Amazon dropshipper.
- You don’t have to worry about traffic. As mentioned, Amazon has hundreds of billions of people activity visiting their marketplace monthly. Forget about learning how to drive traffic to your website, or learning about SEO. It’s all there ready for you.
- When you’ve established fast-moving and profitable products you have the option to move onto FBA. Once you’ve found a winning product you can purchase it in bulk from your supplier (saving you money) and ship it directly to an Amazon warehouse. This warehouse will now take full responsibility for the storage and shipping of your products. Amazon will automatically put you on Prime shipping, this is also another factor of winning the buy box.
- Unlimited sellable products, “nearly”. It’s great knowing that amazon has way over 30 categories of different niches to choose from. Finding a winning product has never been easier, as long as you can find it at the right price.
- Unlike having your own website, Amazon actually owns all of your customer’s data. This reduces the ability to re-target/market to your exciting customers.
- Amazon has the ability to completely wipe you out of business. This may sound like something not to worry about if you’re following their rules. But don’t be fooled, there have been cases of Amazon banning accounts for the smallest of reasons.
- Recurring customers are a thing of the past with Amazon. It’s been statically shown that Amazon buyers will 90% of the time will purchase from the buy box, no matter who the seller is.
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How to succeed in Amazon Dropshipping
Knowing that Amazon Dropshipping can be profitable is great. But knowing how to succeed in Amazon dropshipping is even better. Here are my tips that you must take into account when becoming a dropshipper in this market.
Win the buy box – winning the buy box will make you 90% of your sales if you’re re-selling merchandise or anything branded. People will typically buy directly from this, so owning this spot is extremely important. The winner of the buy box will need to have some of these seller or product features but not necessarily all of them to get it. These include the cheapest price, best seller rating, prime delivery.
Nothing less than a 95% seller’s rating – a seller’s rating is the rating that customers give you after receiving their order. Keeping a good seller rating is an enormously important ranking factor to win the buy box.
Minimize cases opened against you – if there’s a problem with a customer’s order that you haven’t solved correctly, they can open a case against your account and Amazon will then step in. If Amazon steps in and sees that the customer is in the right (which is highly likely), they’ll automatically refund the customer.
Activity replying to customers – Amazon gives you 24 hours to reply to your customers before flagging them as “late”. Reducing the number of “late” replies will also have an impact on the chances of getting the buy box.
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I believe I was able to answer your question and give a full insight into Amazon dropshipping and its profitability.
Hopefully, this would have motivated you in starting a brand new dropshipping business.
Best of luck and Peace!