Our Amazon dropshipping review compiles the actual opinions of 5 sellers. Amazon dropshipping is a legit business, but you'll need to watch your metrics closely. These metrics require meticulous work, all for a business model with low profit margins and a high risk of suspension. The successful Amazon dropshippers are making good money (6 figures) but they are also playing in the grey zone, figured out a way to get around the Amazon TOS by using aged FBA accounts. The key to profitability is to still dropship from retail stores like Wal-Mart or Home Depot while avoiding account suspensions.
What is Amazon Dropshipping?
Amazon dropshipping involves listing an image on Amazon. The image has no stock to back it up. A customer buys the product depicted in the listing. The drop shipper orders the product from product suppliers. This supplier ships it directly to the customer.
When you hear the term Amazon drop shipping, it’s most likely the speaker is discussing this option.
Dropshipping From Amazon
Some Amazon sellers follow an alternative drop shipping business model. This type of dropshipping involves listing a product image on a site other than Amazon. Drop shippers might use eBay, a Shopify store, or their own website.The customer purchases the depicted product. The seller buys it from Amazon. Amazon ships the product directly to the customer. Essentially, it’s a way around some roadblocks you’ll face when dropshipping on Amazon.
If you decide to do this, then you should pick products that are not Amazon prime because they will ship those products in Amazon boxes.
Pros and Cons of the Amazon Dropshipping Business Model
General Pros of Amazon Dropshipping
There is a large customer base, and demand is high for the correct products.
You won't have to pay a large initial investment for inventory or any Amazon warehouse fees.
You won't have to create your own products or brand, like private label or Merch by Amazon.
Due to low initial investment and no need to house physical inventory, there is a lower barrier to entry.
Can list as many products as you want
Take advantage of Amazon's trust
Won't need to find your own customers. Less marketing efforts since Amazon has the traffic.
General Cons of Amazon Dropshipping
Unlike Amazon FBA, you must handle all refunds and cash back disputes. Amazon will side with the customer.
Because there is more competition and the price of dropshipping goods is high, your profits will plummet.
It's extra hassle to fulfill orders since you don't have your own steady supply. You depend on the inventory of various suppliers and sometimes they may run out and catch you off guard.
Amazon holds funds for 2-3 weeks. During this time, you will need to buy the products out of your own pocket. If you don't have cash ready, you need to use credit cards.
Amazon dropshippers face a lot of account suspensions because of their dislike for customers getting confused getting shipped products in Wal-Mart boxes or other retailers and that causing confusion. In order to combat this, they require a Letter of Authorization but this is sometimes difficult to get.
Not eligible for Prime and the Amazon buy box
What Disadvantages Are There to Dropshipping on Amazon? 5 REAL Sellers Weigh In
Aaron Goldstein: “Once I Saw the Bloodbath on Amazon… in 2021, I Decided I Needed to Find Another Platform.”
Aaron Goldstein has been working through this business model for years, and started Amazon dropshipping. Now, he has moved his business to Facebook Marketplace. Here’s why:
Can You Dropship on Amazon Legally?
Yes, you can dropship on Amazon breaking no laws. But, you need to be mindful of Amazon’s policies regarding dropshipping. Bookmark the Amazon dropshipping page. Read through it at least once a month. Ensure you don’t miss any changes.
Their policy clearly states that they're against dropshipping from retail stores like Wal-Mart or Home Depot. However, Amazon dropshipping is profitable by dropshipping from retail stores. To get around this people use seasoned account which doesn't get looked into as much by Amazon for the Letter of Authorization.
How to age an Amazon seller account??
This is the recommended timeline to age a seller account.
Joey Gaule: “I Don’t Actually Know If I’m Even Going to… Receive This Money.”
Joey Gaule is a YouTuber and 7-figure dropshipper. Here's his opinion on the Amazon dropshipping store:
Can You Dropship on Amazon Without Stock?
Yes. You do not need stock to dropship on Amazon.
While this is a great perk, it’s where things went wrong for Joey. Since he didn’t have stock in an Amazon fulfillment center, he wasn’t able to fill orders while he was on vacation. When he returned, he had dozens of Amazon sales but hadn’t been able to fill them and take time off.
Steve Chou: “Just Because Something is Easy Doesn’t Mean That It’s Better.”
Steve Chou is a straightforward eCommerce store guru with years of experience. Here’s what he says about Amazon dropshipping:
Do I Need a Website to Start Amazon Dropshipping?
No. Steve Chou has multiple stores on very own websites. With Amazon dropshipping, you won’t have to purchase a domain, design your website, fill it with copy, and generate traffic. You will make an Amazon Seller Central Account and have access to Amazon’s trusting customers.
Paul J Lipsky: “Selling On Amazon Has Become More Frustrating.”
Paul J Lipsky has had enormous success dropshipping on Amazon and eBay. He is the face behind Dropshipping Titans, which used to teach Amazon dropshipping. Here’s why he stopped selling this course:
How a Seller Dropshipping on Amazon Handles Returns
If you catch a return request before Amazon approves it, you will need to get a shipping label from your supplier. This can take some time, and Amazon can jump in before you can pass it on to your customer.
If the label arrives on time, the seller gives it to the customer, and the customer uses it to return the product to the supplier. Depending on the condition of the item, the supplier will then return the money back to you.
Kevin Pak: “Most Drop Shipping Businesses Use Retailers Because They Have Better Margins.”
Kevin Pak is a “multiple 6-figure Amazon seller”, working through a private label business model. Here’s why he won’t switch to dropshipping soon:
Where and How Should I Connect AliExpress to Amazon for Dropshipping?
You should NOT use AliExpress to dropship on Amazon, at least right away. To use AliExpress, Alibaba, Walmart, and Home Depot you should first season your account slowly or with Amazon FBA. This might lower your chances of Amazon asking for a letter or authorization, and so you may be able to avoid suspension.
Dropshipping on Amazon is difficult. There are countless issues with Amazon's Terms of Service that make it even worse. The main issues with this business model include:
- Amazon will almost always side with the customer.
- The product margins are miniscule.
- You can make quick money, but it's not sustainable.
- You must have the documentation to back up anything you sell.
- Getting sales a second time is tough because Amazon hides customer data from you.
- Amazon doesn't give sellers a fair chance to handle their own claims and returns.
- If Amazon thinks you broke a rule, they can ban your account.
- When Amazon bans your account, you lose access to your funds.
- It can take a long time to appeal your account closure. Sometimes, it's impossible.
How to Make Money with Amazon Dropshipping: Best Practices
6 Best Practices for Suppliers and Profit Margin
Best Practices to Avoid Suspension
See your metrics by going to your Amazon seller account. Click performance and account health. Your Amazon account will include these:
Conclusion: Is Dropshipping Worth It On Amazon?
An Amazon dropshipping business can be worth it because it can allow you to sell more products faster without having to take the risks & time of investing in your own products. This Amazon business model has the greatest chance of fast money with the least amount of initial investment. But, the suspension risks, small profit margin, and amount of ongoing work required to fulfill orders is something to consider.
There are still plenty of people doing dropshipping on Amazon and making 6 figures, because they're willing to play in the grey zone of Amazon's terms of service. They used aged accounts that do not get flagged as much for the letter of authorization, so they're still able to dropship from retailers like Wal-mart and Home Depot.
In the end, research this business model thoroughly before starting. Make sure you are well aware of the risks, and if you can get around the suspension, you can make good money.
My Online Business Portfolio in 2022
Amazon FBA: $15K NET per month (After 50% split with a partner)
Local Lead Generation: $52K NET per month
Amazon FBA is a great business model but like all businesses it has its challenges, particularly how competitive it's becoming as more big brands & suppliers began selling on FBA themselves 2-3 years ago.
Another business model I've had a lot of success with is local lead generation. It's simple and less competitive. It might be a better fit for some people.
Click here to learn all about it: Local Lead Generation vs. Amazon FBA