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Some of the most successful Amazon drop shippers claim that their revenues are over seven figures. However, their net profit margins usually are less than 5 percent. So, how much can Amazon dropshippers potentially make?
It varies based on the portfolio of products you sell on the platform and its margins. On average, an intermediate drop shipper makes anywhere from $1,000 to $50,000 a month on Amazon. However, Amazon dropshipping has a really big failure rate as most of the time people tap into competitive niches and quit too early.
If you’re considering starting out with dropshipping, this article will give you a holistic overview of dropshipping on Amazon and Shopify to help you determine which is the viable option for you.
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How Much Do Dropshippers Make?
There are dropshippers who lose money and dropshippers who make millions of dollars. Unfortunately, the majority of entrepreneurs and new businesses fail due to some wrong activities or they just end up quitting.
The reason why dropshipping has a really big failure rate is that people don’t have skin in the game and they believe that it doesn’t require work!
So, it’s very easy to give up and dropshipping because the low barrier to entry allows a lot of people to just dip their toes in the water so you’re not necessarily getting experienced entrepreneurs who are really committed to succeeding.
If you’re considering getting started with dropshipping, you would either start on Amazon or create your own self-hosted dropshipping store on Shopify.
So, which is the most viable option for you as a complete beginner and how much would it cost you to get started? Let’s figure this out together!
☝️ Amazon Dropshipping
Working with a company with a market cap of over $1.7 trillion is definitely a lucrative opportunity and a great place to tap into!
However, it comes with some challenges that you as a beginner need to be aware of.
How Much Does Amazon Dropshipping Cost?
Amazon makes selling as a drop-shipper fairly reasonable. By definition, dropshipping means you don’t need to hold any inventory so your only real cost is the cost of setting up a seller account on Amazon!
Amazon has two seller account options; individual plans which cost $0.99 cents per unit sold (up to 40 units per month), and professional plans that cost $39.99/month to sell unlimited units each month.
You don’t need to have a business, you don’t need to have an LLC, you can just sign up as an individual seller. However, a business, a bank account, LLC and business location will add to your authoirty on the platform.
It’s important to keep in mind that Amazon takes a percent of whatever retail is charged. This is based on category of product sold. For instance, cell phone devices are 8%, clothing is 17%, and so on!
If a seller truly drop-ships, the fee for storage would be based on wherever inventory is held. If a seller uses Fulfillment by Amazon, a storage fee is based on physical size and weight.
However, it is important to note that storage fees dramatically increase in Q4 and increase if inventory sits in Amazon facilities for an extended period.
There is the actual cost to ship the product. Most individual people do not have the shipping leverage that Amazon has. But the smaller and lighter the product, the lower the shipping costs tend to be.
Beyond that you need enough to cover your orders until your Paypal or Stripe money clears. I’d say $300 would be a bare minimum to get started to avoid any problems along the way.
Is Dropshipping On Amazon Profitable?
There are, of course, a lot of variables to profitability but, yes, dropshipping on Amazon is could be rewarding and fruitful profitable if you know what you’re doing and what product to sell.
To determine if a potential dropship model is profitable, it would be best to build a few pro forma P&L statements. Start with expected financials and build several variations based on cost and demand variations.
Generally speaking, I would follow this model:
Your revenue equals the projected units sold multiplied by the sales price of comparable products on Amazon.
Subtract selling referral fee, calculated as whatever percent Amazon charges for that type of product.
Subtract cost of sales equals the projected units purchases multiple with its cost, plus the costs to get the product from source to the storage facility.
Subtract Storage Fee charged by Amazon or other facility.
Subtract the fulfillment fee and/or shipping charges.
Most product is sold on Amazon is from the first page of search results. So, the fastest way to get there is through Amazon Advertising.
Subtract the advertising expenses.
Subtract other fees.(photography, graphic design, rent, travel, office supplies, etc.)
Is it still positive? Good! This leaves the amount of profit that can be used to pay the owner, buy an additional product, increase advertising spend, etc.
If the calculation results in a negative, better to find another category in which to compete.
How Much Can You Make From Amazon Dropshipping?
As far as how much Amazon dropshippers make that’s a very vague question, its like how much does a restaurant make, well some restaurants lose money, some make $30,000 a year and others make $3 Million per year.
I would say the vast majority of dropshippers are just dipping their toes into eCommerce and don’t really give it a serious effort so the majority probably only last a few weeks, lose money, and fail.
There’s truly no limitation for how much you can potentially make with Amazon dropshipping, the sky is the limit! It’s all about testing what works and capitalizing on that.
The revenue and profit markup really vary depending on the niche and the products you end up selling on the platform.
Additionally, having any expenses like advertising will also shrink your markups, so it’s worth taking into consideration!
Some quick tips for crushing it with Amazon?
- Start slow, start smart!
- Learn what sells and does not!
- Avoid categories that are not highly competitive!
- Don’t be scared to test, learn and invest!
- Always learn from people who have what you want!
What Can I Sell On Amazon As A New Seller?
Just about anything you’ve seen on Amazon! Clothes, books, home goods, office products, electronics. It is easiest to make money in spaces that are less competitive.
For instance, cell phone cases and nutritional supplements are highly competitive and should be avoided. It’s important to follow the financial model not your heart.
Picking a product to sell on Amazon requires a lot of research. Unlike eBay or setting up your own dropshipping store, finding products that you can potentially make money with will take a lot longer on Amazon.
Theoretically, you can sell anything that’s not in prime. Extensions like Prime away allow you to do exactly that!
In addition to that, you don’t want to sell products that are sold by an FBA seller or by Amazon either because you simply cannot afford to compete with them!
Finally, it is easiest to stay in the retail space between $10 and $100; the volume tends to be there. Storage and shipping costs will be lower on smaller and lighter products and you will be able to make a decent profit markup.
Can I Dropship From Alibaba To Amazon?
You can probably get away with it but technically that violates Amazon TOS regarding dropshipping.
Also, packages from China to the US take an eternity to arrive, so you’re going to have very upset Amazon customers and likely will get suspended within a matter of weeks.
Companies like Spocket and Salehoo allow you to find trustworthy suppliers from the USA, Canada, and English speaking countries so you can enjoy the fair advantage of fast shipping.
👉 Spocket Review: (Open in a new tab)
👉 Salehoo Review: (Open in a new tab)
How Do I Dropship On Amazon Without Money?
The only way to begin dropshipping on Amazon without money would be to take on debt.
If someone wishes to begin drop shipping on Amazon and does not have capital, it would be wise to start especially slowly to get an understanding of how to sell, where the growth opportunities lie, get a feel for both general and unexpected costs of a particular product type, etc.
A slow, conservative start will limit financial exposure. One could even stand up a business on Amazon utilizing credit card debt; although I would suggest against this because credit cards typically charge very high rates of interest.
Something else that is very important to consider is the decision to operate truly as a dropshipper doing Fulfilled by Merchant or using Amazon’s distribution centers and operating under the Fulfilled by Amazon model.
The tradeoffs here are as follows:
- Amazon FBM – Under the FBM model, storage is typically less expensive and fulfillment is done by the individual running the business so there is no Amazon fulfillment fee but there is a shipping fee.
- Amazon FBA – Under the FBA model, storage tends to be higher (especially in Q4) and there is a fulfillment fee paid to Amazon based on the size and weight of the product.
Amazon Ninja Master Class by the great Kevin David! Learn more here!
The best benefit to operating under the FBA model is that your product can be sold under Amazon Prime; generally speaking, that is not the case with FBM. Many buyers on Amazon will not purchase a product unless it is Prime.
✌️ Shopify Dropshipping
When it comes to eCommerce solutions and companies, Shopify tends to be the leader in the market with over 1,000,000 stores hosted!
The way that Shopify basically works is that it acts as your cloud-hosted eCommerce solution, which allows you to create a digital storefront in a matter of minutes, without any coding skills or technical knowledge.
Related: Is Shopify For Dropshipping Only? (You Need To Know This!)
How Much Does Shopify Dropshipping Cost?
It costs anywhere from $29 to $299 a month, depending on your business requirements and the subscription plan you end up picking.
If you’re just starting out, the basic package of $29/month would be more than enough, and you can definitely upgrade as your business grows.
It’s important to mention that Shopify does offer a free trial of 14 days that can be beneficial for you to get familiar with the platform without pulling out your wallet.
With the free trial, you can create your store, edit its design, add your products, prices, pages, and more! However, in order to receive real orders and capture payments from your customers, you would need a paid plan.
You can learn more about Shopify’s packages and plans in this ultimate Shopify pricing guide.
How Much Money Can You Make Dropshipping On Shopify?
The short answer is it depends. It depends on you, your efforts, your products and how you promote your business.
Similar to Amazon dropshipping, there’s no real limitation on the amount that you could be making dropshipping on Shopify.
You need to keep in mind that this is not an over-night success. It requires some upfront investment and hard work, but it’s definitely worth it and will pay off soon if you know what you’re doing.
Unfortunately, most people quit too early and they end up claiming that dropshipping is dead of a scam.
The fact is, they just don’t want to put in the work or they don’t have the needed knowledge to make it through.
Entrepreneurs like Kevin David have been killing it with dropshipping and making 7-figure from the comfort of their homes.
Is It Better To Dropship On Amazon Or Shopify?
A Shopify dropshipping self-hosted store will come in handy if you’re looking forward to having full control over your business, website, and customers.
Having a third party website on Shopify allows you to sell anything and list whatever you want on your store without any limitations or restrictions, and also allows you to create your own unique selling point or unique value proposition.
With a Shopify store, it’s possible to create a brand-centered business and focus on how your product differes from your competitors’ and what’s unique about it.
This is not the case with Amazon. Amazon is full of resellers, and competing with those big guys could be tough. And in addition to all of that, Amazon has very strict dropshipping standards!
They require you to be the “seller of record”, meaning any packing materials, lables, invoices, etc… must be of your business.
You can’t order something from Ali Express or Walmart and send it to an Amazon customer. You would need to ship your products to a warehouse near your potential buyer so you can take advantage of fast shipping.
Companies like Printful have warehousing services that can help you store, pack and ship your products on autopilot. You can integrate it with your Shopify store and do your own branding of boxing, invoices, and more.
How To Make Money Dropshipping?
Dropshipping is centered around selling other people’s products, while having the supplier fulfill, pack, and ship the product to the consumer.
You simply list their products on your store for a higher price, and when someone purchases from you, your third-party supplier ships it directly to them.
The difference between what you charge your customers and what the supplier has charged you is your profit!
Can You Lose Money Dropshipping?
Dropshipping is a business model that was created to reduce your costs and sell anything globally without holding any inventory, and paying for products that won’t sell.
However, there are some bad activities and mistakes that would cost you money in dropshipping. Some are:
- Picking the wrong supplier – A wrong supplier can cost you much and can actually ruin your whole business. You always want to stick to trustworthy suppliers that have high-quality products, have good customer support, dropshipping friendly, and that ship quickly!
Related: Want to know the ultimate alternative for Aliexpress for finding quality products and trustworthy suppliers from English speaking countries? If so, you’ve got to check this article out!
- Handling refunds incorrectly – The internet is full of scam refunders who can ruin your reputation. By stating your refund and return policies and make them visible and navigational on your store, you should be okay! I recommend allowing refunds on faulty products.
- Paid advertising not on point – You can easily lose your shirt by showing ads to an irrelevant audience. Marketing is complicated and is getting tough day after day. So, unless you have the right skill, outsource it from freelance marketplaces like Fiverr or Upwork.
How To Avoid Losing Money When Dropshipping
Losing money is just part of the dropshipping game, and you don’t really need to avoid losing money. You should be focused on how to serve your customers better and provide a better experience.
If you pick the right supplier, sell the right product that solves a particular issue for the right group of people, handle refunds correctly and do proper targeting, the money will just follow and you will eventually stop losing money.
Tip: What I usually do when I have an unsatisfied customer, especially if they have received a wrong variant, color, size, is that I allow them to keep the product and send them a new one on the house! This will:
- Reduce your processing fees.
- Prevent messing your reputation.
- Makes the process faster.
- Satisfy your customer and turn them into a free marketing machine.
This works best for low-ticket products and may not work for high-ticket ones.
In addition to all of that, most of the time, your loss is due to wrong tracking in profits and expenses!
What’s Better Than Dropshipping?
Whenever the word Shopify is mentioned, most people relate it to dropshipping and selling physical goods. However, using Shopify without dropshipping is something that most veteran online sellers are aware of today.
I’ve recently published an article on how to use Shopify without dropshiping, people have been in love with it! You’ve got to check it out!
Overall, Shopify is an eCommerce company that has everything you need to start selling online, anything, anywhere!
Selling digital products and services could be a way more flexible and rewarding venture than dropshipping as you don’t need any inventory, you don’t need to make your customers wait for weeks to receive their orders, and you don’t need to get hundreds of orders to make a 1000 grand!
Entrepreneurs in the 21st century are taking advantage of a much more innovative model, called “Drop Servicing”…
What Is Drop Servicing?
Drop servicing is a business model that’s similar to dropshipping, whereby you sell other people’s products, but this time digital products, not physical goods.
This business model has been growing significantly, and so does the eServices industry as well!
The global eServices sales are projected to hit $240 million in 2021, as business owners and entrepreneurs will always need more services from real humans to handle their designs, marketing, content, and more!
Why Is Drop Servicing Better Than Dropshipping?
Drop servicing is a way flexible business model as it’s a digital-products centered type of models.
With that being said, below are some of the reasons why drop servicing is better than dropshipping:
- Higher margins for a lower volume of orders.
- Potential for monthly recurring revenue.
- No shipping involved since you’re selling digital products.
- Lower refund rates.
- No returns.
- Higher customer average value.
- Lower customer acquisition cost in the long run.
- A lot of up and cross-selling opportunities.
- Faster order fulfillment and delivery.
Want to learn more in-depth about each of the above benefits of drop servicing? This blog post could be of great help!
How Much Does Drop Servicing Cost?
It varies upon the company you end up using. If you use Shopify, you should be prepared for at least $29/month. On the other hand, if you want to create a self-hosted website on WordPress, it would cost you an average of $90/year with Bluehost.
Ultimately, you can leverage sales funnels toolkits like Clickfunnels that would cost you at least $99/month. It’s the costliest option yet the most effective one for selling online, especially digital products and services.
Clickfunnels does offer a 14-day free trial, where you get the chance to try out the platform for free, without pulling out your wallet yet.
Don’t believe that Clickfunnels is the best sales funnel builder around? Why don’t you give it a try for free?
Conclusion – Do People Make Money On Amazon Dropshipping?
So, is Amazon good for dropshipping? It is, but having your own self-hosted Shopify store will give you more control over your products, customers and marketing.
This article has answered a commonly asked question among entrepreneurs which is “how much do Amazon dropshippers make” to help you understand how much can you potentially make and what would be the best option for you.
Dropshipping is a great business model and you can make 6-figure from the comfort of your home. But, you’re already putting in the work and time, why not put it into something more viable and rewarding?
Want to learn the secrets of the new-age startup? I’ve created a sweet little 12-page pdf for you.
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Special thanks for our contributors:
- Jo Barnes Founder of Your Lifestyle Business
- Abby Herman Director of Strategy at Snap Agency
- Jeremy Lippenholz Director of Commercial Operations at Armacost Lighting
- John Frigo eCommerce Manager at Best Price Nutrition
- Stacy Caprio of Renuw Skincare
Cheers,
Odeh Ahwal
Frequently Asked Questions
Yes, Amazon allows dropshipping by creating a professional seller account for $39.99, but you would need to follow their dropshipping standards and rules.
Dropshipping is definitely a rewarding business model if you know what you’re doing and what to sell. You need to pick products that solve a problem for people and that has a potential for a good financial gain.
Dropshipping is definitely worth it, and a lot have been killing it with it. However, entrepreneurs in 21th century are taking advantage of a more innovative business model called drop servicing, whereby you sell other people’s services instead of physical goods.
Shopify is an eCommerce platform that allows you to sell anything online, be it physical goods, digital services, or even start a blog. Shopify allows you to create any type of website with little to no skills.
You can use Shopify to sell your digital products or services online, not just physical goods. In addition to that, you can use Shopify to build your own blog and start uploading valuable content to the web.
