Dropshipping has increased in popularity over the last decade. This e-commerce fulfillment model is an easy, cost-effective way to conduct business online.
Amazon is the largest e-commerce platform globally, making it one of the best destinations for dropshippers to operate.
Although Amazon is widely considered the go-to for Ecommerce activity, dropshipping on the platform can be confusing for beginners. With the right information, however, it is a straightforward process, as this article will show.
Regular Dropshipping vs. Amazon Dropshipping
In the traditional dropshipping setting, you list your products on the e-commerce site without holding any inventory. When the customer places an order, you notify your supplier, who then ships directly to the customer.
However, on Amazon, the process is a little different. You won’t have a proprietary website. Instead, you’ll use the Amazon platform as your storefront.
How dropshipping works on Amazon
Amazon’s terms of service explicitly state that “purchasing products from an online retailer and having that retailer ship directly to customers is not allowed.” The platform does not forbid dropshipping, but it has several restrictions that make the traditional approach unfeasible.
To dropship through Amazon, you’ll have to buy products from a manufacturer or supplier.
An alternative is to use the Amazon “Fulfilled by Amazon” (FBA) program. With this option, Amazon itself picks, packs, and ships the products for you. They also take care of order tracking for your customers, returns, and other customer service-related issues. The costs that arise for these services depend on the product and the storage time-length.
It is technically “illegal to use the traditional dropshipping model on Amazon though there are still sellers who do. So, to avoid Amazon penalties, it is best to play by the rules.
Benefits of dropshipping on Amazon
Given the complexity of dropshipping on Amazon, eCommerce retailers often shun it in favor of alternatives like eBay and AliExpress. However, it confers several benefits
Reach a large customer base
Amazon continues to be the largest retail platform in the world, with over 300 million active users globally. This broad customer base guarantees high traffic from buyers across the globe.
The Amazon brand
Amazon dropshipping can facilitate brand awareness and build loyalty faster than a proprietary store. Customers will not differentiate between your products and Amazon’s. This perception stimulates trust, which would have taken longer to establish on your own with no credible name.
It has reduced operational costs.
Under the FBA program, you do not need to handle any product on your own. Amazon does it for you. It also makes marketing easier with Amazon ads available to help you get your products seen by a broad audience.
Broad product selection
Dropshipping on Amazon presents the opportunity to target many products at the same time. This large pool of options provides the chance to target more niches, increasing your business reach. Amazon provides over 30 product categories to choose from…
How to dropship on Amazon (Step by step process)
1. Set up an Amazon seller account.
To sell on Amazon, you need an Amazon seller account. You can create one on Amazon seller central. You will have 2 options.
- “Individual” option, where you are charged $0.99 for every item sold,
- The “Professional” option, where you pay $39.99 per month. Your choice should ideally depend on the volume of your products.
2. Select a Dropshippingtool
Platforms, like Wholesale2B, offer order management systems that let you add Amazon as a sales channel.
3. Find a product to sell.
Product selection is a critical step. It is okay to test out a few different products initially, to see what works.
Bonus tip; It helps to identify products with high demand and low competition.
4. Get approval
Some products or niches require approval from Amazon. These include beauty products, Accessories, Books, Wine, etc.
5. Identify suppliers from whom to buy.
You can find these on marketplaces like AliExpress. Carefully investigate the supplier’s history to avoid problems down the road. You should also consider more than one supplier.
6. List your items
After you find products to sell, you can now add them to your store. If the product does not already exist in the catalog, use the “Add a Product” tool under inventory to create a detail page. If it exists, search for the item on Amazon and use “Sell yours here” to upload the details
7. Spread the word
No one will buy if they do not know you, so promote your store wherever you can on social media and other digital channels. You can also use the Amazon ads and run promotional campaigns using specific keywords.
Challenges with dropshipping on Amazon
Drop-shipping with Amazon yields many attractive benefits, but is not without difficulties…
Like other third-party platforms, the platform charges extra fees you must account for as you price your goods. For the Professional set up, an 8-15% referral fee charge applies. For the Individual setting up, a $1 per sale applies. Depending on the products you sell, this can seriously eat up your already low profits.
The dropshipping business model has a low barrier to entry. Anyone can take it on and even sell the same things as you, leading to high competition. To counter this issue, focus on differentiating your brand, so customers come to you and not someone else.
No control over the product
You do not handle the goods yourself and, therefore, cannot guarantee quality. This situation is risky because if the buyer does not get the products he expected, you must take responsibility even when it is not your fault. Therefore, it’s important to vet your suppliers before working with them.
Lower profit margins
On a good day, dropshipping profits carry about a 30% margin. When Amazon adds the extra seller fees, this margin may shrink even lower. Additionally, there are high chances that other sellers on Amazon selling products similar to yours. The competition might force you to continually adjust your prices to compete favorably, leaving you with an even smaller profit in some instances.
Unlike running your dropshipping site, when using Amazon, you must play by their rules. Amazon’s stringent set of dropshipping rules indicates that dropshipping is acceptable but must follow the set rules. For example:
- The dropshipper must record as the seller on the product
- The dropshipper must identify himself on the packaging, payment slips, and other information.
- The shipper must remove any packaging or other indicators of the third-party supplier.
- The dropshipper is responsible for processing returns.
The rules forbid traditional dropshipping practices such as:
- Purchasing products from other retailers for them to ship directly to customers.
- Shipping products with invoices, packaging, and additional information with third party supplier’s label.
It is easy to fall victim to supplier mishaps within such an environment and end up getting banned altogether.
Tips for success in Amazon dropshipping
Dropshipping on Amazon is still a worthwhile venture. All you have to do is follow a few best practices.
Promote your product listing like your business depends on it because it does. Aggressive promotion ensures that you maximize sales. Share extensively on social media, using blogs, etc.
You may also take advantage of the paid options like Amazon Pay-per-click (PPC), where you can create ads for your products so that they appear higher in product searches.
Vet your suppliers
Do your research on different suppliers you want to work with. Key factors to focus on include: the quality of products, delivery times, customer reviews, etc. Where possible, get samples of the products you want to sell. This verification gives an idea of what your customers will be receiving when they order.
Use a wide product range initially.
It helps to cast a wide net (initially) when choosing products to sell. With most operational costs out of the way, it becomes easier to test different products first. Then you can maintain those that sell and get rid of those that do not.
Many internet buyers rely on product reviews when making purchases due to the uncertainty that online buying presents. More good reviews increase the chances that customers will consider and buy from you. So, do not be afraid to ask satisfied customers to leave reviews.
Create unique presentations.
Many sellers on Amazon deal in products similar or identical to each other, creating stiff competition. Therefore, creating a unique product listing makes you stand out and attract more visitors to your pages.
Focus any descriptions specifically around the product offered. Ensure that you do not import products directly from the supplier without editing their descriptions first.
Dropshipping can be a daunting but highly rewarding business venture. To ensure the latter is the case, you need services that offer you a reliable, automated, stress-free set-up for your dropshipping business.
Wholesale2B is an industry-leading platform guaranteed to accelerate your dropshipping success with efficient and user-friendly tools.