How to Start Dropshipping from Amazon
A Definitive Guide
When I started dropshipping almost 7 years ago, drop shipping was a fairly unknown business model. Nowadays everyone seems to be doing the same thing, everyone! A few months ago I bought a drone and a memory card for the drone, from a physical store (old-school, I know) from the well known, national, UK electronic retailer; Maplin. The items I wanted they don’t keep them in store but would deliver them to my house for free… totally fine, and totally normal, until…. after I paid, I got the usual dropshipping script!
You should know it well by now: “The items are coming directly from the manufacturer straight to you, so both the drone and the memory card will be delivered separately”! I was very surprised just how many major retailers are dropshipping without us even knowing it! If I just ordered the drone on its own, or just the memory card, I would never even know they are dropshipping! I would think maplin sent it straight to me.
Check out the google trends chart for the term “dropshipping”
And it is popular for good reason!
Dropshipping today is performed on all major marketplaces, here are just a few popular examples:
- Dropshipping from Amazon to eBay
- Dropshipping from eBay to your own website
- Dropshipping from Aliexpress to eBay
- Dropshipping from eBay to eBay
- Dropshipping from Amazon to your own website
The list could go on, but you get the picture. You can dropship to/from almost any marketplace, so long as you are able to make a profit from it.
In this post, I will tell you everything you need to know about dropshipping from Amazon.
- Is drop shipping from Amazon legal
- Dropshipping from Amazon — a simple step by step example
Is dropshipping from Amazon legal?
The short answer is YES. Dropshipping from Amazon is legal, there are no explicit laws or policies prohibiting this type of business model or strategy. Beyond legality though, some might argue there is an ethical issue here:
- Buyers who receive products in Amazon packaging feel cheated especially when they purchased something on your website for say $60 and find it on Amazon for $10. Once these buyers find out you are dropshipping from amazon they often leave negative feedback and ratings on the sellers account in order to take revenge or simply return the item.
- Amazon sellers also feel deceived when they realize someone is dropshipping from Amazon and making money on their back. I’m in a few amazon / ebay sellers facebook groups… just keeping my ear to the ground.
I once read about an Amazon seller who saw one of the exclusive high-ticket items being sold on a shopify website at an inflated up price. What he did next was he bought the item from the Shopify website significantly raised the price on the Amazon listing, forcing the Shopify seller to cancel the shopify order, and also remove the item from his website.
However, I should state that cases like this are few and far between, most Amazon sellers are just happy to make the sale and don’t care what you do with the item.
Word of warning….
Dropshipping from Amazon to eBay is perfectly legal although eBay is making steps to limit it.
From eBay’s perspective, I can understand why they are doing this, if a customer orders an item from Ebay, and it comes in an Amazon package, they will just order direct from Amazon next time. Since July 2017, eBay has banned hundreds of accounts for this reason.
What does amazon dropshipping involve
Basically dropshipping is all about arbitrage, the term arbitrage is taken from the stock market world, you buy an item for $10 on Amazon and sell it for $15 your website, so you make $5 arbitrage profit (before other expenses).
Arbitrageurs know how to take advantage of fluctuations in prices and are usually familiar with a niche market such as knives for example. An Amazon dropshipper might buy the knife being sold on Amazon and market it on their own website with some well-made advertising. The dropshipper will also very likely increase the price by 2x or 3x depending on the neiche and his advertising methods.
The formula for a successful Amazon arbitrage is having a good amount of knowledge of a niche market + being able to identify an undervalued item in a ‘foreign’ marketplace + a keen eye for marketing and rebranding.
Amazon is literally brimming with arbitrage opportunities. Sellers make a few common mistakes when listing items and you can definitely take advantage of this in order to make a quick buck:
- Misspelling — Otfen sellers misspell or abbreviate words due to lack of space in the title and then nobody can find their listing which often makes them desperate to sell and allows you to pick up items at rock bottom prices. For example: ‘designr bag’ instead of ‘designer bag’.
- Bad photos — If a good value item is being advertised with poor quality photos, buyers are much less likely to take a risk and buy that item. You can sell the same item with good photo, and increase your prices greatly.
- Missing keywords — often people forget to use an important keyword in their title, for example, someone selling a shirt might call it ‘beautiful size 30 top’ instead of ‘beautiful size 30 blouse (or shirt)’ which people are more likely to search for.
- Lack of marketing spend / know-how
So how do you go about doing Amazon dropshipping?
Here is a concise step-by-step guide:
- Go to Product Mafia to find for items that are currently in demand.
2. Check Amazon manually using all the misspelling of your item and category as well as different word combinations or try using the correct spelling but see if you can find even cheaper prices. Remember, the prices may have changed since the product was uploaded to Product Mafia
3. When you find a good potential product — determine if the price listed will allow you to make a profit. For example if you found an item on Amazon for $5 and you saw that people are selling that same item on Shopify for $25 then your profit margin is $20 minus fees, shopify fee’s, payment processing fees etc. Then simply add the product to your website and run some cleaver advertising campaigns to bring in traffic, Product Mafia also give example of winning Facebook ads for every product they upload.
Here is a real life example:
- Like I said before. The first step is to use Product Mafia to find a product that is demanded. Here is one I found:
2. Find the product cheap on Amazon, with free shipping and gift option available. In this case, I found the item on Amazon cheaper than on Aliexpress!
3. Add product to own website
4. Run some ads
5. Hopefully, some profit has been made
It is hard to say whether or not profit has been made because the examples given above are not from my own website. However, it is safe to say the website was making money as some point, because the video has amassed 960k views in around a month. Looking at profiles of the people reacting and commenting, it seems most of them there European, to acquire this many views to a European market would have cost thousands of dollars in Facebook ad spend, and no said person would spend that much if they were not making money from that ad! So safe to assume, money was made here.
Pitfalls of Dropshipping from Amazon
There are several potential pitfalls to avoid when drop shipping from Amazon:
#1: Customer satisfaction
The seller you are buying from on Amazon is responsible for the packaging, shipping and ultimately the quality of the product. If he or she fails to ship on time, packaged with care or provide a high-quality product you will be the one bearing the brunt of the customer and not your drop shipper. You will be punished with negative feedback and ratings.
#2: Inventory
You don’t really know who the Amazon seller is or where he is from, where he gets his inventory and what his story is. For all you know he has a one time 200 product supply and after that, he disappears. By this time you could have set up and entire website and funnel based around that product. Wasted.
#3: Shipping costs
Yes, usually you can find and sell products from Amazon which offer free shipping. But what if a customer on your store orders a product from you and suddenly Amazon is out of stock. Sure you can cancel the order, but it’s not that simple because if you spent money on advertising to acquire that customer, once you refund the customer, you have just thrown away your advertising money, making a loss, and you have an unhappy customer. So where do shipping costs come in here? This happened to me before, I was dropshipping chinos from Amazon, I sold around 100 at £20 each, buying them on Amazon for around £10 with shipping, advertising costs around £5 per order, so my profit was around £4 per order after all fee’s and expenses. However, when Amazon went out of stock, I had to find another supplier from Ebay, and ended up paying the same £10 per item, but an extra £3 per item for shipping. I was just grateful I didn’t have to refund 100 customers! Meaning my total profit all my chino orders that weekend went from £400, £100, if I was only selling chinos that weekend, my time would have been better spend flipping burgers at mcdonalds.
#4: Low profit margins
Sometimes the profit margins are not high enough to be worth your time, in the pet-hair gloves example from above, the seller started out selling the item at $24.99, but is now selling at just $16.99. Leaving just $6.99 to pay yourself, pay for staff, pay for advertising etc. Usually, on a $24.99 product, you would expect to pay around $6-$8 in advertising to make the sale! Very slim margins indeed.
#5: Competitive advantage
I constantly write about the importance of competitive advantage (see my other blog post about how to compete with Amazon). One of the main competitive advantages of drop shipping is that you are usually selling products that the customer did not previously know exist or was available for sale.
Sure, you can just tell the customer that Amazon is merely fulfilling your item. But by sending them a package from Amazon, wrapped in Amazon packaging, as Amazon does. What you are telling the customer is that, hey… Amazon exists, and your item is probably on Amazon too.
#6: Logistics
At first glance dropshipping seems easy as you don’t have to deal with shipping or purchasing the product but in reality, this is not true. You are responsible for answering all of the customer’s questions and apologizing and/or compensating them if anything goes wrong with the purchase.
Dropshipping from Amazon — conclusion
I personally am not crazy about the Amazon arbitrage model as it lacks originality and is too volatile in terms of price and product fluctuations for my taste, but I can see good opportunities, for those who are brave and willing.
Amazon can still be a good method to get you out of a pickle fast. One good example if when you are dropshipping from Aliexpress, and received the dreaded email: I didn’t realize it would take 3–4 weeks, please cancel my order immediately.
Well, with Amazon you have the option to reply and say “Don’t worry, your item will be with you in 2 days”, avoid the refund and keep avoid an unhappy customer.
Also, should you decide to use Amazon as your sole dropshipping source, need to be a very dynamic person — constantly looking for new opportunities, markets, and products to spin and sell. This is a time-consuming process but we all trade our time in one way or another for money — choose your products wisely and good luck to all.
