Amazon dropshipping can be profitable in 2024 for sellers that:

Although Amazon dropshipping avoids incurring Amazon FBA fees as you don’t utilize Amazon for storing and shipping your products, you still need to consider other costs, like Amazon referral and advertising fees, when analyzing a product’s profit potential. Amazon referral fees typically range from 8% to 15% of a product’s selling price, while Amazon advertising costs between $0.05 to $10 per click, depending on the competitiveness of the product and category. 

Furthermore, you’ll need to calculate the cost of third-party shipping, whether that’s directly through your manufacturer or a third-party logistics (3PL) service, because Amazon won’t be handling this for you like they would in the FBA program. Your business is also likely to have some ongoing overhead costs that affect your overall profitability as well, like the monthly Amazon selling subscription and access to any dropshipping tools you might leverage for your business, like AutoDS. 

Operating your dropshipping business according to Amazon’s dropshipping policy is essential to being profitable because, if you don’t, Amazon can withhold your earnings. An Amazon seller on the Amazon Seller Central forum reported that they used dropshipping to ship products to their Amazon customers and received an account suspension email. In response, other sellers noted that they probably wouldn’t receive their withheld earnings, which means the dropshipper likely had a negative profit from their Amazon dropshipping experience. 

A unique Amazon dropshipping strategy that appears profitable right now and doesn’t risk account deactivation from Amazon is to dropship on Amazon using a 3PL service. An Amazon dropshipper on Reddit claims to be generating $2,000 to $3,000 per month with Amazon dropshipping using this tactic. Instead of dropshipping to Amazon from another retailer, which is against Amazon’s dropshipping policy, they send the product from the retailer to a 3PL service to have the product repackaged as their own and then have the 3PL service send the product directly to their Amazon customer. 

As a low barrier to entry business model, dropshipping on Amazon has become incredibly competitive over the years. As such, it’s essential to find dropshipping suppliers that can offer you some type of competitive advantage on Amazon to be profitable, such as a new product not currently sold on Amazon, rapid shipping times, or a favorable return policy. 

Trying to dropship a product already sold on Amazon can be unprofitable because you’ll be competing against other dropshippers, and might even be competing against the product manufacturer itself. Since your dropshipping, one of the few ways to differentiate yourself in this scenario is on the selling price, which could lead to unprofitable outcomes as sellers try to out-price each other to win Amazon's Featured Offer (Box Box) spot. Another way to attract sales as an Amazon dropshipper is to find a product supplier that offers rapid shipping time. Since many dropshippers sell products that ship overseas from China, looking for domestic dropshipping suppliers that can offer shipping times similar to Amazon FBA can be a profitable strategy. Lastly, Amazon typically has high return rates, so it’s optimal to work with dropshipping suppliers that offer favorable return policies to better ensure profitability, like covering all costs associated with returning the product to them. 

An alternative online business model with higher profits margins that avoids the high competition and refund issues associated with Amazon dropshipping is local lead generation. Local lead generation entails setting up websites that attract customers for local service businesses. These websites are affordable to set up, typically requiring a few hundred dollars at most. They can generate between $500 to $3,000/month, offering website owners upwards of 90% profit margins. 

In the following article, we discuss Amazon dropshipping profitability further by looking at how much profit margin you can expect to make, how much the average Amazon dropshipper earns, and how much you'll need to invest to get started. 

5 Interesting Facts About Amazon Dropshipping Profit Margins

1. A Good Profit Margin for Dropshipping Products in Amazon is 15% to 30%.

Shopify's article entitled What Is Amazon Dropshipping? How To Dropship on Amazon in 2024 mentions the average profit margin of Amazon dropshippers to be at 10%-30%. But, you should expect 10% margins when you start dropshipping on Amazon. You need to remember the Amazon dropshipping fees, which take about 15% off your top line revenue. According to Reddit user Joeyoungblood, a good gross profit margin should be around 15% to 20%. He suggests controlling the Cost of Good Sold (COGS) like labor and advertisements to earn a decent profit. So, if you start dropshipping with a 10% profit margin and don’t account for fees, you will be losing money before you make any.

2. Amazon Dropshippers Earn Between $1,000 to $50,000 Monthly on Average.

BlueCart and eComDimes' blogs reveal that the average income of independent Amazon dropshippers is between $1,000 to $50,000 monthly. Alternatively, Amazon dropshippers under an employment contract make $32,000 and $65,000 in dropshipping salary per year, according to ZipRecruiter's March 2024 data. Considering that the average profit margin is around 15%, those making $1K must have around $7K in gross profit monthly while those earning $50K need to put in around $335K.

3. Beginner Amazon Dropshippers Can Make Around $1,000 per Month if They Put In the Work.

Quora user Kaif Khan mentioned that beginners in the Amazon dropshipping industry can earn $1,000 monthly, given they consider factors like product selection, marketing/advertising, supplier reliability, and many more. Don't expect more than this at the beginning, especially on your first month. Even if you make a sale on your first day, it will be a small amount. You can get your earnings after 2-3 weeks. 

4. You Can Start an Amazon Dropshipping Business With at Least $150-$250.

With Amazon dropshipping, you won’t need to pay anything until a customer orders a product. When they do, you'll need to purchase that product from your third-party supplier. This is called your product cost. Reddit user TonyDeMontana invested $150 to start his Amazon drophsipping business. He made a $400 profit, which he used to run his online business and purchase more products. Aspiring dropshippers also need to select a selling plan to gain access to Amazon's dropshipping tools and services. Amazon also deducts referral fees and other selling fees, depending on the product you sold.

Optimizing your listings and sales entail in-depth research to find a profitable product and marketing strategy. This costs nothing. There are many tools you can use to help you out like Google Trends, Google Keyword Planner, and Google Analytics. You can also hire a virtual assistant or purchase software to complete these tasks for your online store. Virtual assistant wages run around $2-$7 per hour while tools like MerchantWords run from $35-$149 monthly.

Costs to expect:

5. The #1 Reason Amazon Dropshipping is Not Dead and Still a Profitable Business is Its High Search Interest.

Dropshipping is still a growing industry. In fact, Grand View Research predicts that the global dropshipping industry will grow by 28.8% yearly until 2025. Because of this, Amazon is getting more strict with its policies. Google Trends also showed a significant uplift in online internet searches from October 2018. The "Amazon dropshipping" keyword peaked in the U.S. market in January 2023. The industry's growing interest also means beginners and aspiring business owners are saturating the space.

Amazon Dropshipping Profitability: The Good and Bad

What Factors Affect Amazon Dropshipping Profitability?

Competition, pricing strategy, Amazon fees, marketing initiatives, product cost, supplier response, and market demand are the primary factors that affect Amazon dropshipping profitability. They help Amazon dropshippers plan for future product offerings, third-party supplier partnerships, and business expansion. Jordie Black's article on Prisync highlights the significance of considering shipping costs, product markup, and other critical factors to come up with the right pricing for your products. A great strategy for mass selling and gaining loyal customers is to offer discounts or limited-time promotions. Quora user Nader Elbaz suggests initiating these marketing tactics to boost sales and gain a good reputation. This helps beginner dropshippers to increase their profit potential in the long run.

What Amazon Dropshipping Products are the Most Profitable?

Clothes and footwear, health & beauty, and kitchen & dining products are the most profitable Amazon dropshipping products, according to Anna Baluch's article on Forbes entitled 13 Profitable Dropshipping Products To Sell In 2024. Home decors, pet essentials, and baby products are also among the top 6. The COVID-19 pandemic set the stage for increased e-commerce purchases in 2020 and beyond. In his March 2024 YouTube video, founder of Supreme E-com AC Hampton mentioned top-selling products like wireless solar-powered security cameras, pet-related products, and neck support products.

How Much Can You Make From Amazon Dropshipping?

You can make anywhere from $3,000 to over $50,000 monthly from Amazon dropshipping, depending on your products, niche, and market. Reddit user Thehighgroundgang mentions earning $3K per month in profit from a $10K revenue. He also commented on how some successful dropshippers like Steve Tan, co-founder of The Ultimate Dropship System, make a 7-figure income yearly. In another Reddit thread, user Donniecrunch reveals how he makes a $5K to $50K profit monthly, while user Real_Nobody_4210 earns $9K per month. You can make significant money on Amazon dropshipping, given you put in the time and effort needed to grow your business.

Can You Lose Money in Amazon Dropshipping?

Yes, you can lose money in Amazon dropshipping if you don't manage your product quality, third-party suppliers, shipping process, and product pricing, as stated in Wei Linchao's article on BESTFULFILL. You can incur refund charges, chargebacks, negative customer reviews, and legal drawbacks. This leads to fewer purchases and lower monthly revenue. With such a low profit margin and the 8%-15% Amazon dropshipping fees, you can easily lose the money you invested.

How To Increase Profitability in Amazon Dropshipping?

Amazon Dropshipping vs FBA: Which is More Profitable?

Amazon dropshipping can be more profitable than Amazon FBA if you know how to source products that are lower than market average and find a reliable wholesaler. However, many Amazon FBA business models are more profitable than Amazon dropshipping in terms of net profit. Amazon FBA and Amazon dropshipping have very similar profit margins. The average for Amazon FBA is 10%-20%. But there are many Amazon business models that fall under the Amazon FBA category.

Is Amazon Dropshipping More Profitable Than eBay Dropshipping?

Yes, Amazon dropshipping is more profitable than eBay dropshipping because of lower fees in the long run. However, when talking about eBay dropshipping vs Amazon dropshipping, the former has fewer costs than running an Amazon business for the first 200 listings. During this time frame, you won’t have to pay for anything. But, if you continue past 200, you will pay an insertion fee of $0.35 per listing/category. If you choose to list a single item in various categories, pay this fee per product category. You will pay a final value fee of 10%. This takes a cut from your sale, including shipping. Selling on eBay also requires much more time for keyword and product research. But, eBay is more forgiving than Amazon with dropshipping and their dropshipping policy.

Is Shopify Dropshipping More Profitable Than Amazon Dropshipping?

Yes, Shopify dropshipping is more profitable than Amazon dropshipping because it doesn't have the 8%-15% Amazon fee. On Shopify, some sellers make up to $100,000 in revenue yearly. If you already have a Shopify store, you can bring your customer base over to Amazon through the Amazon sales channel. However, you can get free organic traffic on Amazon if there's not as much competition for that product. If you're dropshipping on Shopify, chances are you'll need to buy traffic using paid ads. This can get expensive, and requires a completely distinct skill set.

Amazon Dropshipping FAQs

Why Starting a Local Lead Generation Business is More Profitable Than Amazon Dropshipping

Amazon dropshipping offers lucrative income if you have built a solid presence and customer base. However, local lead generation is more profitable because it doesn't have seller fees and Amazon fees. The Amazon dropshipping business model is risky in the long-term because you're relying on Amazon's terms of service or policies. If you unexpectedly break a rule, your account could get suspended anytime. And you can lose all your hard-earned money.

According to Liran Zablo, Content Manager for AutoDS - Automatic Dropshipping Tools, you can earn a significant profit by setting a 15% break-even fee and a 50% profit margin. However, Amazon dropshipping has higher fees and stricter rules in 2024 and beyond. Amazon fees can go as high as 45% for Amazon device accessories. You also have little control over how Amazon advertises your products. Pus, you need to deal with 24/7 customer service, supplier product shortages, and market saturation.

Alternatively, the local lead generation business model is simpler and more profitable. Its localized niches offer you less competition and more opportunities for business expansion. You also don't need to deal with stressful customer service and exorbitant platform fees. All you need is to create websites for each local service niche you want to venture into. Then, you must rank them organically on search engines through the dynamic SEO strategies. Once your sites are ranked, free leads start pouring in. You can then forward the leads you collect to local businesses and earn around $1K for each lead or over $10K per site.

Save yourself from the stress of handling multiple product and supplier issues, customer concerns, and third-party platform policies. Choose local lead gen and establish a stable passive income stream.