How Does Dropshipping Work with Amazon?
Not wanting to spend a boatload of money, but want to sell on Amazon? Well, I have just the solution for you. Dropshipping! This exciting opportunity has been around for some time and has started to grow in popularity in recent years. It’s a simple business model which can hold great rewards if utilized and exploited correctly. But, how does dropshipping work with Amazon?
Dropshipping is a business model that e-commerce entrepreneurs use in order to sell goods online. The method requires you to generate sales and then directly send the order to the supplier that will then ship it directly to your customer, meaning you don’t hold any stock. For example, on Amazon a customer purchases something from your store, you then sent the order to your supplier, the supplier then ships that item directly to your customer.
As you can see, on paper it sounds like an outstanding opportunity, but is it worth it? It can seem exciting for any novice that has encountered a guru telling them about this. I understand, I’ve been there before. In this article, we’ll be uncovering if Amazon dropshipping is worth it or not.
Is Dropshipping on Amazon Worth It?
As you’re probably aware, Amazon is the world’s largest eCommerce site and earned an estimated $280 billion back in 2019. Gaining access to this huge audience can seem like gold-dust, and it sure is, if you’re able to scale correctly.
However, the “worth” of dropshipping on Amazon will depend on your expectations. To make this much easier, we’ve broken this down into pros and cons.
Pros to Dropshipping on Amazon
Dropshipping on Amazon can provide you with some great opportunities if you’re able to manage and execute them correctly. But what exactly are the advantages to dropshipping on Amazon?
Audience – One of the great benefits that’ll you’ll receive by dropshipping on Amazon is the recognizable branding of one of the largest online marketplaces, as well as having access to their 310 million active users. Scaling your own online dropshipping store to these types of numbers is near impossible and can take years.
By dropshipping on Amazon, you’re skipping this process. Although you’ll have to pay for a monthly membership and a hefty 15 percent for each sale made on their site. Without having to do all the marketing, relationship building, problem-solving, hosting and SEO, it can quickly become worth thinking about.
FBA – For those who don’t know, you’ll also be able to ship directly from Amazon rather than your dropshipping supplier if this is more reliable. FBA, in simple terms, is Amazon’s “own brand” dropshipping concept that allows sellers to purchase goods and ship them directly to an Amazon warehouse. Once they’re here, Amazon will then dispatch them when a sale is made.
Having this as an option to grow into is fantastic, most of the time it can be a lot more trustworthy. Personally, I would dropship a product directly from a supplier and then transfer it over to FBA once I’ve gained data on how it sells.
Low start-up Costs – In comparison to other online money-making ideas, dropshipping on Amazon has a substantially low cost. This is because you won’t be holding any physical stock and therefore won’t need to purchase any until that item has sold. You’ll also only pay sales fees once an order has been placed and processed.
Automation – With the power of plugins, CSV files and many other automation-like tools that can be integrated into your Amazon sellers account can most make the process almost “hands-free”.
Something that really catches my eye when it comes to selling on Amazon is the sheer possibilities to make it somewhat passive. Although it’ll never really be hands-free, you can still create a system that requires minimal effort.
Cons to Dropshipping on Amazon
With all pros, must come cons. Below are some reasons why dropshipping on Amazon may give you a disadvantage over other platforms.
Policies – Amazon generally doesn’t allow dropshipping on their platform and can instantly ban you if you’re caught. If your supplier isn’t reliable, you may easily be caught.
They put this policy in because they want you to use their FBA service. If another supplier is offering this type of business model, then they’re taking money away from Amazon.
Customer Expectations – Customers from Amazon only expect the best, not just in the product but also in the service. From purchasing all the way up to the delivery arriving at their door. Nothing by excellence must be shown towards them. Customers can easily open cases on sellers and in most situations, win the case.
Competition – As you’re now aware, Amazon is the largest online marketplace that is available on the internet today. This isn’t any secret and sellers globally are aware of this. Selling on Amazon comes with a boatload of competition and also from people you least expect it from.
Being an Amazon seller for some time now, I’ve encountered a regular competitor that keeps creeping up on me. If you haven’t sold on Amazon before this might come as a bit of a shock, but the main competitor on Amazon is Amazon. That’s right, when Amazon sees an item selling well, they’ll simply purchase it themselves and start selling it.
Lack of control – The whole concept of dropshipping requires you not to hold any stock and let the supplier deliver the goods directly to the customer. Meaning, you have very little influence on delivery times, quality control and marketing.
If your supplier isn’t performing well, you’ll get all the backlash and the issues will be completely out of your control. Something all dropshippers experience, so finding a consistent supplier is vital.
To be honest, if you’re able to find a reliable supplier that ships fast, provides good quality and is accountable for their job role, you’ll easily be able to manipulate the market on Amazon and uncover some great profit opportunities.
Always remember that dropshipping actually goes against Amazon’s policy and if you’re flagged for it, you may encounter a ban. Try to keep this uncover by providing an excellent experience and service to customers.