How to Dropship on Amazon Without Money | 5 Strategies To Keep Costs Low

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How to Dropship on Amazon Without Money | 5 Strategies To Keep Costs Low

March 6, 2024

by Ippei Kanehara

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How I make $52K per month

How to dropship on Amazon without money:

Get an individual Amazon seller account.
Find a product supplier that will not request a resale or sales tax certificate from you.
List up to 40 products on Amazon.
Use your credit card to purchase products from suppliers when you receive orders.

You can dropship on Amazon for free as you use these zero cost ecommerce ideas. You can even do this business model from anywhere in the world, as long as you have a laptop and an internet connection.

However, no-cost dropshipping may not be a sustainable business idea in the long run. Although it’s possible to start a zero investment dropship business, you will eventually need to spend money to keep it running. For example, Amazon requires a fee of $0.99 per item sold. You may also have to use paid software in addition to using free dropshipping tools. More importantly, you will have to spend on marketing to gain customers for your online store. Others also invest in courses such as 'Selling on Amazon: Build a Successful Dropshipping Business' by Matt Bernstein.

In this feature, we look at ways you can keep costs low in your Amazon dropshipping business, along with the basic and non-essential expenses. We also compare Amazon dropshipping with other selling methods on the platform, plus we discuss the common challenges. Towards the end, we also tell you about another business model that’s more scalable and profitable than dropshipping on Amazon.

How Do You Start an Amazon Dropshipping Business Without Investment? 5 Strategies to Keep Costs Low

1. Apply for Credit Cards

Applying for credit cards will allow you to start dropshipping on Amazon without cash. It’s a common strategy for dropshippers to use credit cards in buying orders. If you have good credit or get a co-signer, you might have tens of thousands of dollars in credit. So when a customer purchases your product, you will get their money from Amazon (minus 15%) in 2-3 weeks. You won’t have to pay your credit card bill for about 30 days.

how-do-you-start-dropshipping-business-without-investment

Here’s what’s great about this strategy:

Your credit card serves as a catch-all until Amazon pays up.

You won’t have to stop doing business until you have the funds.

Your card may generate points and you can earn cashback, which can go back into your business. If your card offers a 5% cash back, that’s $1,000 in your pocket for every $20,000 you spend.

You can also use your points for gift cards so you can buy more products. If you get a VISA gift card, you can use it as a credit card even after it's empty.

Here’s the bad:

If Amazon suspends your account, you might lose access to your funds for 3 months or more. This is common with dropshipping, so imagine paying off a credit card bill of $30,000 or more with no capital coming in.

2. Get a Loan

Getting a loan is another option to consider. You can go for a personal or business loan to secure startup funds for your dropshipping business. Alternatively, you can also approach your friends or relatives to borrow the money you need.

The good:

This is REAL money, and the interest will be far less than your credit card.

Your monthly payments may be smaller than your credit card bill.

You can budget your monthly payments ahead of time.

The bad:

Your monthly payments would make your profit margin even smaller.

Borrowing money from friends/family can lead to broken relationships, especially if Amazon cancels your account and you can’t pay them back.

Running out of capital can get you in trouble. You may have to get a second loan to repay your first loan. This means having to handle two payments a month.

3. Use Your Savings

Using your savings can be an excellent way to have a startup capital. This is most practical since you won’t have to pay costly interests. However, it may take time to build your savings plus using it for your dropshipping business may put your money at risk.

4. Minimize Your Chance of Suspension

Minimizing your chance of suspension on Amazon allows you to avoid potential problems on your dropshipping business. You won’t have to worry as much about those 2-3 weeks that Amazon holds your funds. You also won't worry about the 3 months Amazon can keep your money if they close your account.

Hire a virtual assistant to handle customer service and order fulfillment. Amazon swoops in on A-Z claims. The platform often approves them immediately, far before the drop shipper provides excellent customer service. A VA may help you provide refunds and handle complaints before they turn into claims. This way, you may avoid lowered metrics and getting suspended on Amazon.
Season your account. Amazon watches new accounts closely during their first 3-6 months. They also support FBA users much more than FBM users. This is because Amazon makes more money from sellers that need an Amazon Fulfillment Center to house inventory. So, start your account with an Amazon FBA strategy and then ship your business model to dropshipping after six months.
Purchase a seasoned account. Purchasing a seasoned account usually means spending around $4,000 to $5,000. These accounts have good selling histories and having yours means Amazon will watch you less closely. Plus, you won’t need to waste your time on a business model that you aren’t interested in.

**5. Dropship From Amazon, Not To Amazon**

If you choose to use Amazon as a dropshipping supplier rather than your platform, you won’t have to deal with their stringent rules and 15% Amazon fees. So consider using another platform, like Shopify dropshipping or eBay dropshipping.

How Much Does it Cost to Start Dropshipping on Amazon?

It costs around $600 to start dropshipping on Amazon. This estimate cost covers:

$39.99 per month Amazon Seller Central Professional account. You could opt for a “free” individual account, but you will only be able to list 40 products at $0.99 per Amazon listing. Listing a few products is not a good strategy with the drop shipping business model.
$0-$125 reseller certificate. You might need a resale certificate depending on the supplier you use. This certificate allows you to sell without paying local sales tax. Apply for one in the state in which you have a physical address. Or look into multi-state resale certificates through the Streamlined Sales Tax Governing Board or the Multistate Tax Commission. Some states do not require the certificate, but the supplier you wish to use might.
$25- a few hundred dollars business license. You will need a business license to get a resale certificate.
$0-$100 sales tax certificate. Finally, depending on the state you are dropshipping from, you may also need sales tax certificates.
$500-$1000 at the very least, to start you off buying products. While Amazon holds your funds, you don’t want to fulfill orders without money while you wait for the release.

Non-Essential Costs to Starting Your Amazon Store

Some non-essential costs to starting your Amazon store include pre-order fees, membership fees, Amazon PPC ads, and dropshipping software.

Some wholesale suppliers charge a pre-order fee, deposit, and/or even membership fees. It’s of utmost importance to ask about this upfront before committing to purchase. The amount varies from supplier to supplier.
Using Amazon PPC ads can help push your product to target customers. This can cost you about $50 to $100/day. While Amazon ads allow you to stand out above competitors, your profit margin is already minimal so use this only if your margins can survive.
Dropshipping tools and software can help you automate aspects of your Amazon drop shipping business. You can use free tools like the DS Amazon Quick View a plugin that adds Amazon ranking and the seller’s information to the search page. Meanwhile, Inventory Source connects your supplier’s inventory directly to Amazon for $99/month. This is especially important because Amazon will ask you for proof that your inventory is available so that they are not promoting out of stock products. If you cannot produce this, there’s a high chance of suspension.

Ways To Increase Your Chances of Dropshipping Success in Amazon

You can increase your chances of Amazon dropshipping success by investing on the following:

Have at least $500 to $1,000 in capital upfront, rather than credit (too big a risk)
Provide faster customer service than Amazon to keep metrics high. Watch metrics like order defect rate (must stay under 1%) and cancellation rate (must stay under 2.5%)
Watch your profit margins - usually at around 10-30%.
If you choose to use a retailer like Walmart and Home Depot, your margins will be bigger than if you use a wholesaler. However, make sure that the external packaging only identifies you as the seller. If the retailer is identified in any way, your account might be suspended. Read more about how to avoid Amazon dropshipping suspension before starting this tactic.
Automate purchase orders, finding the right product, repricing your listings, and inventory reporting
Have the right documentation per your state and your dropship supplier (more info below)

PRO TIP: Do You Need a Tax ID Number or Resale Certificate to Dropship on Amazon?

You may need a Tax ID Number or Resale Certificate to dropship on Amazon, depending on your chosen supplier and the state you live in. To find out about laws, requirements, and costs specific to your area, visit your local state websites. Also, ask suppliers upfront about their policies so that you do not make any deals before learning you lack the proper documentation.

How Does Dropshipping Compare to Other Methods of Selling on Amazon?

Compared with other methods of selling on Amazon, dropshipping has its own unique advantages. While it’s not possible to start dropshipping sustainably with no money at all, there are costs that you will not have to think about when dropshipping on Amazon. Here are some common expenses of other Amazon FBA business models that you can avoid with dropshipping:

	FBA	Brand Creation	Product Creation	Bulk Product	Gas	Crowd-fund	Materials
Dropshipping	Cell	Cell	Cell	Cell	Cell	Cell	Cell
Wholesale		Cell	Cell		Cell	Cell
Retail Arbitrage		Cell	Cell	Cell		Cell	Cell
Online Arbitrage		Cell	Cell	Cell	Cell	Cell	Cell
Liquidations		Cell	Cell		Cell	Cell	Cell
Private Label					Cell	Cell	Cell
Passion Product					Cell		Cell
Amazon Handmade				Cell	Cell	Cell
Merch by Amazon	Cell			Cell	Cell	Cell	Cell
Amazon KDP	Cell	Cell		Cell	Cell	Cell	Cell

Dropshipping on Amazon also helps you avoid the costs of creating your own eCommerce site. You won’t have to build a website from scratch and pay a host. While you may still have to spend on ads, you won’t have to pay as expensively so you can drive traffic to your otherwise unknown site. In comparison, Amazon users go to the platform to purchase. This gives you an immediate market for your products.

What are the challenges of dropshipping on Amazon?

Growing competition. With its low cost requirement and low barrier to entry, Amazon has attracted numerous dropshippers. Competition can be intense and other sellers can sell the exact same products as they hop on the latest dropshipping trends.
Delayed payments. In a YouTube video, Aaron Goldsten points out that Amazon usually holds payments for 2 to 3 weeks. This often necessitates upfront capital or good creditfor you to purchase products for your customers.
High replacement costs, penalties, and Prime preference. On Quora, Benjamin Martin writes that products damaged in shipping will incur “higher replacement costs, and eventually penalties from Amazon for higher return rates.” He also adds that most Amazon customers prefer Prime for its speedy delivery.
Limited control over product quality and supply chain. The nature of the dropshipping business model means sellers often do not have any control over product quality and the supply chain. However, you, as a seller, are still responsible for handling damaged products and delayed shipping. If unmanaged, both can lead to negative buyer reviews.

Conclusion: What is a Better Business Model Than Dropshipping?

Local lead generation is a better business model than dropshipping. In many ways, lead gen eliminates many of the common downsides of running a dropshipping business. You won’t have to worry about product quality, handling customer returns, or competing with established sellers. Profits are also way higher since you are not a middleman relying on monthly sales. Plus you won’t have to pay any Amazon fees.

Lead gen is definitely less competitive and less risky, considering that dropshipping success rate is only at around 10% to 20%. With lead gen, you will spend around $500 building a website from scratch and about 6 months ranking it on major search engines. Once your site reaches the top results and attracts organic leads, you can offer your digital real estate to local business owners for rent.

With this, you can get paid as much as $500 to $3,000 per month. Your earnings also multiply as you build more sites targeting different locations and niche keywords. To learn about how you can start your own lead gen business, check out our lead generation coaching program.

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