Amazon Dropshipping: Pros, Cons & Proven Tips for Success

Amazon dropshipping lets you sell products without managing inventory or shipping—just list, sell, and let suppliers handle the rest. Amazon and dropshipping have created a perfect storm of opportunity, with the global market valued at USD 365.67 billion in 2024 and projected to grow at 22.0% through 2030.

But as simple and appealing as it may sound, turning dropshipping with Amazon into a profitable business model requires a thorough understanding of how dropshipping using Amazon works, including choosing the right products, optimizing listings, and understanding the platform’s rules. 

This blog covers:

• What Amazon dropshipping is, and how it works

• Pros and cons of dropshipping using Amazon

• Step-by-step process of dropshipping with Amazon

• Tips to make an Amazon dropshipping business profitable

• Difference between dropshipping and other methods of selling on Amazon

• How to choose a reliable dropshipping software 

• FAQs on Amazon dropshipping
  
  

What does Amazon dropshipping mean?

Amazon dropshipping refers to selling a product on Amazon without stocking it yourself, via a third-party supplier. This method allows entrepreneurs to start dropshipping on Amazon with minimal risk.

What it’s not: Sending your inventory to Amazon warehouses for them to fulfill orders.

Let’s say you list a coffee maker on Amazon. You manage the listing and customer service, and your supplier handles the shipping. When someone buys it, you place the order with your supplier, who ships it to the buyer.  

This dropshipping business model has gained popularity because it eliminates traditional retail barriers while leveraging Amazon's massive marketplace.

Currently a $442.61 billion global industry, dropshipping continues to grow as more sellers look for low-overhead ways to run ecommerce businesses. Amazon is one of many platforms that support dropshipping, as long as sellers comply with its policies.

How does dropshipping with Amazon work?

Dropshipping with Amazon creates a seamless three-way partnership between you, Amazon's marketplace, and your chosen supplier. When you start dropshipping on Amazon, you're essentially becoming the middleman who connects customer demand with supplier inventory, while Amazon provides the platform and customer trust.

Here’s how it goes:

1. Partner with a verified supplier: Sign an exclusive agreement with a reliable third-party supplier who can ship under your online business name and meet Amazon's strict fulfillment requirements.

2. Create optimized product listings: List products on your Amazon store with keyword-rich titles, high-quality images, and competitive pricing that complies with Amazon's guidelines.

3. Customer places order: A customer discovers and purchases your product through Amazon's marketplace, triggering the fulfillment process.

4. Forward order to supplier: You immediately purchase the item from your supplier and provide the customer's shipping details, ensuring same-day order processing.

5. Direct supplier shipping: Your supplier ships the product directly to the customer using plain packaging with only your online store information visible—no supplier branding allowed.

6. Manage customer experience: You update the order status and tracking information on Amazon while handling all customer service, returns, and refunds to maintain your seller rating.

What are the pros and cons of dropshipping using Amazon?

Pros of Amazon dropshipping

Following are the advantages of dropshipping with Amazon and why Amazon seller dropshipping has become popular:

1. Lower overhead costs: Major costs like shipping, storage facilities, and warehouse management are excluded since your supplier handles everything. 

2. Minimal investment: Given the above cost exclusions, the investment required for dropshipping using Amazon gets relatively lower. Essentially, you only pay for: 

• Domain (one-time purchase)

• Amazon Seller account and a minimal commission on every sale

• Product sampling (one-time; depending on your product)

• Running advertisements for marketing

• Future business expansion (subject to profitability)

3. Flexibility and scalability: Test different products and see what sells best without the risk of losing your investment. Pick your own supplier, and run your business from anywhere with no headache of physical inventory management. You can accept more orders without increasing inventory to store, pack, and ship.

4. Easy set up: You list products without purchasing them first, while suppliers track stock levels and handle packaging.

5. Access to Amazon’s customer base: Access Amazon's 3.3 billion active user base (and that’s just in US alone) without spending years building your own audience.

6. Faster deliveries and a focus on better customer service: Suppliers ship directly to customers, while you focus on providing better customer service.
   
   

Cons of Amazon dropshipping

On the flipside, dropshipping on Amazon has some disadvantages, such as:

1. Reliance on suppliers: Since you don’t control packaging or shipping, suppliers shipping wrong or damaged items, or delaying shipping, can hamper business. A poor delivery experience can peril your business and cost 85% of customers. 

2. Fierce competition: About 22–33% of online retailers have adopted Amazon dropshipping as their side gig. With so many entering the market, competition is intense. 

3. Difficulty establishing brand identity: Products arrive in supplier packaging, making it hard to build customer loyalty to your brand.

4. Longer fulfillment timelines: Orders move through multiple hands before reaching customers, extending delivery times compared to direct fulfillment.

5. Discount limitations: Since you’re not in charge of order fulfillment, there is a limit on the special offers (discounts, promotions, bundlings, free shipping) you can run. 

6. Delays in product restocking: Stock outages are out of your hands. You wait for suppliers to restock with no influence over timing.

7. No control over inventory: Skipping inventory management can be a plus, but it also means losing visibility into product quality and stock levels. Without that control, mistimed ads can promote out-of-stock items, leading to wasted spend. 

With atom11’s retail-aware features, you sync ad campaigns with inventory. Automatically pause ads for low-stock items and focus spend where it counts.

Step-by-step process of dropshipping on Amazon

Dropshipping with Amazon involves three main parties working in perfect harmony: you (the seller), your supplier, and the customer. When you start dropshipping on Amazon, mastering the below four critical steps determines whether you build a profitable business or face account suspension.

Step 1: Create an Amazon seller account.

The first step to start dropshipping on Amazon is creating a Professional Amazon Seller account. To create an account, you’ll need to provide the following: 

• Business email address

• Government ID

• Tax information 

• Contact and bank details

• Credit card details

The below image shows what you get when you sign up for an Individual Amazon account vs a Professional Seller account.

Source

Step 2: Find your mighty product with thorough research.

When dropshipping using Amazon, focus your search on products that are not Prime-eligible and not fulfilled by Amazon (FBA) or Amazon itself. Selling those violates Amazon’s dropshipping policy and can lead to suspension.

Look for products with consistent demand, and profit margins of at least 20–30%. You can use CamelCamelCamel to view price history and set alerts for price drops. 

Track the Amazon Best Sellers Rank (BSR) metric to understand how a product sells compared to others in its category. The lower the BSR, the higher the sales. For example, if a satin sheet set is ranked #4 in Home & Kitchen, it's currently the fourth best-selling item in that category. 

Step 3: Partner with a reliable dropshipping supplier

Choosing a reliable supplier is important since it is the make-or-break factor of your Amazon dropshipping business. 

Here’s what your supplier must do:

✔️ Ships orders within 2-3 business days and provides tracking numbers

✔️ Uses simple packaging with no supplier branding

✔️ Provides invoices under your business name

✔️ Handles returns professionally as per your stated policy

You can find suppliers through directories like AliExpress, SaleHoo, and Wholesale Central. Before partnering with any supplier, test their shipping speed with sample orders, check their response time to messages, and read reviews from other retailers. A supplier with great prices but slow shipping or poor customer service will damage your business reputation.

Step 4: Create and optimize your product listing

Before you build your product listing, verify the categories and products that require Amazon’s approval. Ensure it complies with the mandated laws and regulations. 

After receiving approval, build a compelling listing with:

• Keyword-rich titles

• High-quality images

• Detailed, benefit-driven descriptions

• A+ content

  
  

How to make dropshipping on Amazon profitable

Amazon dropshipping requires following specific rules, optimizing your marketing spend, and building reliable supplier networks to generate consistent profits.

Tip 1: Be thorough with Amazon’s dropshipping policy 

Amazon will suspend your account if you do not comply with their dropshipping policy. Be thorough with the following dos and don’ts of dropshipping as mandated by Amazon:

Tip 2: Run sponsored ads

Sponsored ads put your products in front of shoppers already searching for them. A smart, often overlooked Amazon PPC strategy is the 5-50 rule: allocate at least 50% of your ad spend to your top 5 best-selling ASINs (Amazon Standard Identification Number).

Top-selling ASINs usually have the best ACoS (Advertising Cost of Sales) and drive the most sales. Investing more in them improves visibility, boosts brand awareness, and helps other products rank higher. With atom11, you can automate budget and bid adjustments, find the most profitable ad placements, and pause ads during low inventory to avoid wasted spend.

The dashboard gives you real-time data so you can see what’s working, cut what’s not, and focus your budget on what drives results.

Tip 3. Market your product on social media 

Social media platforms like Facebook, TikTok, Instagram, etc., with 5+ billion active users worldwide—are powerful channels for your Amazon listings. You can tap into this opportunity to promote your Amazon products outside the marketplace. 

You can start small. Even a $10 ad budget can go a long way, but without tracking performance, it’s easy to lose control of your spend. Ensure placing your Amazon product links where they’re easy to find: bio, post captions, product descriptions, or even stories. 

Moreover, 63% of consumers trust influencers over traditional ads! Beyond paid efforts, you can share helpful content (unboxing videos, customer reviews, tutorials, etc.) or collaborate with trusted creators to build credibility and translate it into sales growth. The key is consistency and visibility. 

Tip 4. Prioritize customer satisfaction and a strong brand positioning

Not handling inventory management allows you more time to focus on customer service. Respond to questions within a day, send shipping updates, and resolve issues quickly. This helps maintain a strong seller rating.

After delivery, follow up with customers and ask for reviews. If you get a negative review, reply publicly to show you take feedback seriously.

Tip 5. Keep learning and iterating

Use Google Trends to spot what’s in demand. Check what your competitors are selling and how they price their products. 

Keep a regular tab on the Amazon Best Sellers list (updated regularly and reflects real-time sales performance based on BSR) to monitor the best-selling products and product categories.

Additionally, you can track and compare which of your products are most profitable and have the lowest return rates with tools like atom11. 

Adjust your product mix based on seasonal trends. Test new products often, but drop anything that isn’t performing within 30 days. Additionally, you can also leverage Amazon’s free Seller University courses and webinars to stay updated with new policies and strategies.

Tip 6. Diversify your network of suppliers

When dropshipping using Amazon, don't rely on just one supplier because they might run out of stock or have shipping delays, especially during busy seasons.

Amazon sales increase during holidays from November to January, so you need suppliers who can handle higher order volumes. Keep relationships with 3-5 different suppliers for each type of product you sell. Test how well suppliers perform during slow periods before you depend on them during your busiest months.

This process showcases how dropshipping with Amazon streamlines operations for sellers who want to start dropshipping on Amazon efficiently.

Dropshipping vs other ways of selling on Amazon

When choosing how to sell on Amazon, understanding how dropshipping with Amazon compares to other selling methods helps entrepreneurs decide the best approach when they start dropshipping on Amazon.

Choosing a reliable Amazon dropshipping software 

Reliable dropshipping suppliers are key to steady inventory, good prices, and satisfied customers, all essential for a successful dropshipping business.

 Here are three of the best Amazon dropshipping software options:

The 3 best Amazon dropshipping software

1. Shopify: Shopify is a versatile e-commerce platform that integrates smoothly with Amazon. It supports a wide range of apps to help automate dropshipping, handle payments, and track inventory.

2. SaleHoo: SaleHoo offers a large directory of verified suppliers and wholesalers. The platform also includes market research tools to help you identify trending products and niches before you invest.

3. Spocket: Spocket connects you mainly with suppliers in the US and Europe, which means faster shipping times for your customers. It offers order automation and real-time inventory updates. 
   
   

Ace dropshipping on Amazon with atom11

Dropshipping on Amazon offers flexibility and low risk. But success hinges on smart choices, whether it is reliable suppliers or effective marketing. Track your performance and optimize ad spend to stay ahead of the crowd and generate profit. 

Make data-driven decisions and scale confidently with atom11. Take control of your dropshipping success with the right tools—book a demo with atom11 today! 

FAQs on Amazon dropshipping

1. Is it profitable to dropship on Amazon?

Yes, dropshipping on Amazon can be profitable if you manage your costs and product selection carefully. Look for in-demand, low-competition products, efficient suppliers, and keep overhead costs down. 

2. Is Amazon dropshipping legal?

Yes, Amazon dropshipping is legal, but it must follow Amazon dropshipping policy. You must be the seller of record and responsible for packaging, shipping, and returns. You can’t buy from other retailers like Walmart or Home Depot and ship directly to Amazon customers. Violating these rules can result in account suspension.

3. Can you dropship on Amazon for free?

No, you can’t dropship on Amazon completely for free. You need a Professional Seller account, which costs $39.99/month. Other costs include product sourcing and marketing. There’s no upfront inventory cost, but starting with zero budget isn’t realistic.

4. How to handle returns, refunds, and replacements when dropshipping?

You’re responsible for all customer service, including returns and refunds. Coordinate with your supplier to accept returns and issue replacements quickly. Amazon expects sellers to meet its return policy, so make sure your supplier agrees to the same terms. 

5. How to find the best items to dropship on Amazon?

Use tools like Google Trends, Amazon Best Sellers to spot high-demand, low-competition products. Check competitor pricing, product reviews, and return rates. Test new items regularly, and drop those that don’t perform within 30 days.

6. How much does it cost to dropship with Amazon?

You’ll need to pay $39.99/month for a Professional Seller account and 15% referral fees on each sale. Other optional costs include product research tools, advertising, and shipping if your supplier charges for it. 

7. How much does it cost to start an Amazon dropshipping business?

Starting costs typically range from $300 to $1,000. This covers your seller account, product research tools, listing creation, initial ad spend, and possible software like inventory or order management.

8. Is Amazon dropshipping better than Amazon FBA for beginners?

Dropshipping has a lower upfront cost and fewer logistics, making it easier to start. FBA requires buying inventory and shipping it to Amazon’s warehouse. However, FBA offers faster delivery and better customer trust.