How much do Amazon drop shippers make?

How much do Amazon drop shippers make?

Planning to start your Amazon dropshipping business, but worried about how much money you can make?

If yes, then the following blog is for you! Here, we are going to share a realistic forecast of how much money you can make by doing dropshipping on Amazon.

You will see that many Amazon sellers claim that they make revenue in seven figures from their Amazon dropshipping business. But, these are gross sales. Most of the people have margins between 5-30% at max.

Why do the earnings differ so much?
Well, the revenue here is dependent on the portfolio of products and their respective profit margin. For instance, we can say that a new Amazon drop shipper can make up to $1,000 – $50,000 every month. But, keep in mind that Amazon dropshipping has a very low success rate due to the competition and lack of perseverance.

Also, there are some common mistakes that a lot of people make while running their dropshipping business, we are going to mention those as well. First, let’s look at the factors that impact the revenue of Amazon drop shippers.

Fees :
Amazon sets the bar very easy to get started with dropshipping. You do not need to have any inventory, and the only cost you have to bear is the Amazon seller fees.

Now, there are two seller account signup options: the first one is the individual plan, which is $0.99 for every product unit sold[ there is a limit of 40 units per month]. Other than this you can select the professional plan i.e. for $39.99/month without any cap on selling the number of units per month.

You can also sign up as an individual with Amazon, and sell your product on the platform. One more thing that you must know is that Amazon will charge a certain percentage of your sale as a commission. For example, mobile phones charge 8% & clothing for 17%, etc.

However, this is peanuts compared to the cost that the seller has to endure if he/she has to manage the inventory and take care of the delivery part. But, when the seller signs up with the Amazon FBA program, then the fee is charged based on the physical dimensions and weight of the product.

Marketing costs:
One of the biggest expenses that a seller might have to endure is the marketing cost, which refers to putting your efforts & time into marketing. You might have to spend money on Amazon PPC or google PPC ads. Also, you might have to hire a professional copywriter to write engaging and converting product descriptions!

This might differ from business to business, but marketing is crucial for you and your business to succeed and grow in the future!

Taxation :
One thing that a lot of newbie sellers ignore is the taxation on the sale of e-commerce products in their specific country or region. You have to consider this because it is going to eat up your profits! Here, you can either hire a tax professional to guide you through the process of filing taxes or you can go the DIY route to do everything on your own.

Summing up: How much does Amazon drop shippers make?

Again, you might be making as low as $100 or as high as $100k through your Amazon dropshipping business. Keep in mind that dropshipping is a business model and you have to put your time and money to make it grow.

One thing that you have to do is unit economics here i.e. the profit gained on the sale of a single product inducing taxation. For example, you have a product of $50, which is sourced from a supplier for $30, and now you have to pay Amazon based on the plan. Let’s say that you choose the individual plan with $0.99/product. Now, you have to add the taxation as well. We can assume a mean tax of 5% on the invoice value. So, your unity economics would be:

$50[sale value] – $0.99[Amazon commission] – $30 [ Supplier price] – $2.5[ taxation] = $16.51 [ Net profit]

This is the unit economics for a sample product, but keep in mind that your business expenses might differ. But, the main idea here is to calculate the profit per unit & then you can have an idea about your potential earnings.