A Practical Guide to Dropshipping on Amazon

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Yes, you can dropship on Amazon, but let's be clear: this is not a hands-off, automated business model. Amazon has strict rules, and if you break them, your account will be shut down.

The entire policy comes down to one key principle: you must always be the seller of record. This means that to the customer, the product must look like it came directly from your business, not from another company.

Understanding Amazon's Dropshipping Rules

The appeal of dropshipping is clear: low start-up costs and no need to manage physical inventory. It's a solid model, but success on Amazon requires playing by their rules.

The most common mistake is finding a product on Walmart or AliExpress, taking an order on Amazon, and having the other retailer ship it directly to the customer. This is explicitly forbidden and is a quick way to get your account suspended.

Why? If a customer receives a box with Walmart tape or an invoice from another company, they become confused. Amazon is focused on a consistent customer experience, and this kind of confusion is a major policy violation.

The Non-Negotiable Requirements

These are firm rules that Amazon enforces to maintain a trustworthy marketplace.

You Are the Seller on Paper: All invoices, packing slips, and other documents must identify your company as the seller.

No Third-Party Branding: The shipping box cannot have logos, tape, or markings from your supplier. A plain brown box is ideal. An AliExpress-branded box is a violation.

You Handle All Customer Issues: You are responsible for processing returns, answering questions, and resolving any problems. You cannot direct a customer to contact your supplier.

To make this clear, here is a checklist of Amazon's core policies. Use it to ensure your operation is compliant from the start.

Amazon Dropshipping Policy Checklist

Policy Requirement	What It Means in Practice	Risk of Non-Compliance
Be the Seller of Record	Your name/business must be on all invoices, packing slips, and external packaging.	High: Immediate account review or suspension.
Identify Yourself as the Seller	The customer should have no idea a third-party supplier is involved.	High: Core policy violation leading to suspension.
Remove Third-Party Retailer Info	All packaging must be neutral or branded with your information, not your supplier's.	High: Evidence of retail arbitrage, a major violation.
Handle Returns and Service	You must accept and process all customer returns and handle all communications directly.	Medium to High: Poor metrics and policy warnings.
Comply with All Seller Agreement Terms	Your dropshipping model must still adhere to all other general Amazon policies.	Varies: Depends on the specific violation.

Following these rules isn't just about avoiding suspension; it's about building a sustainable business on a major marketplace.

A Global Perspective on Compliance

This level of operational discipline is crucial everywhere, but especially in high-growth eCommerce markets. For example, India is becoming a fast-growing dropshipping hub, with a significant portion of sales happening on marketplaces like Amazon India.

The Indian market is projected to grow from US67.5 billion by 2033. You can find more insights on the Indian dropshipping market's growth to understand the opportunity. For sellers who master Amazon's rules, the potential is significant. For those who don't, it's often a short-lived effort.

How to Find and Vet Reliable Suppliers

Your Amazon dropshipping business is only as good as your supplier. A great partner makes the process smooth. A bad one can get your account shut down.

Finding a reliable supplier involves more than a quick Google search. You are looking for an operational partner who can meet Amazon's strict standards. You need to investigate their processes before listing any of their products.

Key Areas to Investigate in a Supplier

When you talk to a potential supplier, your evaluation should focus on three things. These directly impact your account health and customer satisfaction.

Inventory Management: How do they track their stock? The key question is whether they can provide a real-time inventory feed or, at minimum, daily updates. Selling an out-of-stock item is a fast way to get negative feedback and an account penalty.

Shipping and Tracking Capabilities: Amazon requires valid tracking numbers for orders. This is not optional. Confirm that your supplier provides tracking for every single shipment and find out their average dispatch time. A partner who ships late will damage your account metrics.

Packaging and Branding Compliance: Many new dropshippers get this wrong. The supplier must agree to ship everything in plain, unbranded packaging. If their logo or marketing materials are in the box, it’s a direct violation of Amazon's policy, and your account is at risk.

Critical Questions to Ask Potential Suppliers

Once you have a shortlist, it's time to ask direct questions. Their answers will reveal their experience and reliability.

"Can you guarantee that no marketing materials, invoices, or branding from your company will be included in the packaging?" The only acceptable answer is a confident "yes."

"What is your exact process for handling returns?" Since you are responsible for the customer, you need to understand precisely how they will coordinate with you when a product is sent back.

"Do you have experience working with other Amazon sellers?" A supplier who already knows the rules is a major advantage. They will understand the importance of valid tracking, neutral packaging, and fast dispatch times.

As product discovery on the platform evolves, you'll want partners who understand the ecosystem; you can learn more about how AI is changing Amazon search with our guide on Rufus.

Pay close attention to any red flags. Vague answers about inventory systems are a bad sign. A "supplier" who is just dropshipping from another retailer is a deal-breaker. A compliant foundation is the only way to build a dropshipping business that lasts.

Creating Product Listings That Convert

You have found a reliable supplier. Now you need to turn their product into a sale. On Amazon, this happens on your product listing.

Think of your listing as your most important sales tool. It's your digital storefront and product demonstration. When you dropship, customers can't touch the product, so your listing has to do all the work.

A good listing not only describes a product but also convinces a customer to buy while signaling to Amazon's algorithm who should see it.

Crafting a Title That Grabs Attention

The title is the first thing a shopper sees. It needs to be clear, descriptive, and contain the most important information without being a jumble of keywords.

A useful formula includes the brand name, a key feature, the material, and its primary use.

For example, a weak title is simply "Blue Yoga Mat." A much stronger title would be: "ZenFlex Pro Grip Eco-Friendly TPE Yoga Mat (6mm) – Non-Slip, Lightweight for Hot Yoga, Pilates, and Floor Exercises."

The second version immediately tells shoppers what makes the mat special and uses terms they are likely searching for. It provides essential details upfront to encourage a click.

Writing Bullet Points That Answer Questions

Use the bullet points to address potential customer objections. Each one should highlight a real-world benefit from the customer’s point of view.

Don't just list technical specifications. Explain what those specs mean for the customer.

Weak Bullet: "Made of TPE material."

Strong Bullet: "Eco-Friendly & Body-Kind Material: Crafted from non-toxic, latex-free TPE that’s better for the environment and gentle on your skin. Focus on your practice without worry."

The second example shifts from a simple fact to a clear benefit—peace of mind. When you answer customer questions proactively, you build trust.

Optimising for AI and User Intent

With Amazon's AI assistant, Rufus, becoming more integrated into shopping, optimizing for conversational search is important. People are asking full questions, such as, "What's the best yoga mat for a beginner with sweaty hands?" Your listing must contain the answers.

This requires a smarter approach. A tool like Cosmy can show you the real questions customers are asking about products like yours. This helps you find content gaps in your own listing where you are failing to provide information that turns a browser into a buyer.

By auditing your content against these real-world questions, you can sharpen your bullet points and description to match what users are looking for. Our complete Amazon listing audit checklist provides a framework for AI optimisation. This is a data-driven way to ensure your listing not only ranks but also connects with shoppers and drives sales.

Keeping Orders and Customers Happy

The moment a customer buys from your listing, a process begins. How quickly and effectively you manage it will determine your account health and reputation. A solid, repeatable workflow is your defense against bad reviews and policy violations.

Your first task is to send the order details to your supplier. Automate this as much as possible, whether through a direct integration or a clear method like a shared spreadsheet. The goal is to reduce delays and human error. Once your supplier ships the order, they must provide a valid tracking number. Upload this number to Seller Central immediately.

The Never-Ending Battle for Inventory Sync

One of the biggest mistakes in dropshipping on Amazon is overselling—listing a product that your supplier has just run out of. This leads to cancelled orders, which is a major penalty for your account metrics. To prevent this, you need a reliable system for keeping your supplier’s stock levels synced with your Amazon listings.

The best solution is a real-time API feed, but not all suppliers offer this. At a minimum, your supplier must send you a daily inventory update file. You need a process to update your Amazon inventory using this file every single day. Skipping even one update is a risk you will eventually lose.

You Are the Face of the Business

On Amazon, you are responsible for all customer service. All questions, complaints, and return requests come to you, and Amazon expects you to handle them quickly and professionally. You can never tell a customer to contact your supplier.

This includes managing returns. You need a clear returns process established with your supplier beforehand. A typical flow is: you authorize the return in Seller Central, provide the customer a shipping label (usually back to your supplier's warehouse), and then issue the refund once your partner confirms they have received the item.

Knowing the Lay of the Land: Regional Differences

An operational strategy that works in one market may not work in another.

For example, in India, logistics and payment culture are different from North America. Cash-on-delivery (COD) is still very common, sometimes accounting for up to 90% of eCommerce orders in India. For a dropshipper, this means a higher risk of returned orders, which affects cash flow and profit margins. Understanding these local details is essential for building a sustainable operation. You can learn more about how payment methods affect dropshipping in India to be better prepared.

Pricing Products to Ensure Profitability

Profitability in dropshipping is about what you keep, not just what you charge. Proper pricing is a balance between being competitive enough to make sales and building a business that is actually profitable.

If your margins are too thin, a single unexpected return or a slight increase in shipping costs can erase the profit from several sales.

First, identify every expense. This includes more than just the wholesale cost of the product. You must factor in Amazon's referral fees, which are typically around 15%, plus the actual cost of shipping from your supplier to the customer.

Also, build in a buffer for other costs, such as potential returns, customer service time, and any software you use.

Calculating Your True Costs

For many new sellers, the cost-plus pricing model is a good starting point. You add up your total cost for a product and then add a fixed percentage on top to set your selling price.

Here is a practical example.

Cost Component	Example Amount (£)	Notes
Product Wholesale Cost	£10.00	The price you pay your supplier for the item.
Shipping to Customer	£4.50	The actual shipping fee your supplier charges.
Amazon Referral Fee (15%)	£3.75	Calculated on the final selling price (£25.00).
Return Buffer (2%)	£0.50	A small percentage to cover potential return costs.
Total Landed Cost	£18.75	The true cost to get the product to the customer.
Final Selling Price	£25.00	The price the customer pays on Amazon.
Net Profit	£6.25	Your actual profit after all costs are paid.

This table shows that on a £25 product, your real profit is £6.25, giving you a 25% net margin. This clarity is important, but a rigid cost-plus strategy is not always enough to stay competitive.

Staying Competitive Without Sacrificing Margin

It can be tempting to price your product just one penny lower than your top competitor. This often leads to a "race to the bottom" where no one wins. Instead of just undercutting, focus on the value you offer and your own financial health.

Automated repricing tools can be helpful here. A smart repricer does not just blindly undercut the competition. You can set rules to automatically adjust your price to strategically win the Amazon Buy Box, but only within a profitable range that you define.

This process is directly tied to how you manage orders, because every step has a cost.

As this flow shows, every stage—from processing the order to handling support—has costs that must be included in your pricing from the start.

Scaling Your Operation (and Dodging the Bullets)

Growth is more than adding products. Smart scaling means strengthening your operations, protecting your account health, and expanding strategically without taking unnecessary risks.

The key is to monitor your performance metrics closely. They are your early-warning system.

Amazon tracks many metrics, but dropshippers should focus on two: your Order Defect Rate (ODR) and your Valid Tracking Rate (VTR). Your ODR measures customer dissatisfaction—negative feedback, A-to-z claims, chargebacks—and must stay below 1%. Your VTR measures whether you provide customers with legitimate tracking numbers; you need to be at 95% or higher.

Think of these metrics as gauges on your business dashboard. A declining VTR indicates your supplier is getting sloppy. A rising ODR means customers are receiving the wrong item, it's late, or the quality is poor. Ignoring these warnings is the fastest way to get your account suspended.

Strategies for Sustainable Growth

Once you gain momentum, the urge to expand quickly is strong. But there is a right way and a wrong way to do it.

The safest strategy is to diversify your supplier base. Relying on a single partner creates a single point of failure. If they have a warehouse fire or their shipping carrier goes on strike, your business could stop overnight.

Add a second or third supplier. Use them for a different product category or as a backup for your bestsellers. This is not just about adding more products; it’s about building resilience. It’s an insurance policy for your operation.

Another effective tactic is to transition your successful products to Fulfilment by Amazon (FBA). Once you have proven a product has consistent demand through dropshipping, it's time to take the next step. Place a small bulk order with your supplier and ship it to an Amazon warehouse.

This hybrid model offers the best of both worlds. You get the faster Prime shipping that customers prefer, better control over inventory, and often, higher profit margins. You use dropshipping to test the market with minimal risk, and then use FBA to scale what works.

The data supports this: an estimated 80–90% of new dropshipping stores fail within the first year. As you can read in this analysis of dropshipping failure rates and how to avoid them, failure is rarely about finding a winning product. It's about building an operation that can handle an influx of orders. Long-term success on Amazon comes from compliance, resilience, and a focus on the customer experience.

Frequently Asked Questions

Is Dropshipping Even Allowed on Amazon?

Yes, but it is highly regulated. Amazon has a specific and strict dropshipping policy that you must follow.

The main rule is: you must always be the seller of record. This means every invoice, packing slip, and the external packaging must identify you as the seller, not your supplier. Any sign of a third-party retailer's branding can lead to account suspension.

Also, buying a product from another retailer like Walmart after you make a sale and having them ship it to your Amazon customer is explicitly forbidden. Amazon considers this retail arbitrage, not dropshipping, and will shut down your account for it.

What’s the Biggest Risk I Should Worry About?

The biggest risk is your lack of control over key parts of the customer experience.

If your supplier makes an inventory mistake, ships an order two days late, or sends a low-quality product, you are the one who is held accountable. Your account health, seller feedback, and product reviews are all directly affected.

A few late shipments or a series of negative reviews can damage your metrics and put your business at risk. This is why finding a reliable supplier is not just important—it's the foundation of a successful dropshipping business on Amazon.

Ready to turn Amazon’s opaque AI ecosystem into your competitive advantage? Get a free, data-backed audit of your product listings with Cosmy and see exactly where you can improve visibility and conversion. Start your free audit today.