What is Amazon Dropshipping?

Amazon dropshipping is a method of order fulfillment for e-commerce operators that entails outsourcing procurement, storage, and shipping to a third party supplier. 

The dropshipping business model is simple. As an e-commerce seller, you provide the storefront online and promote your products. When you receive a customer order, you forward the order to the third party dropshipper and tell the customer that the products they ordered are en route. The drop shipper handles the remainder of the actual fulfillment process by sending the tangible goods to the consumer. You also have the option to take care of customer service, if you choose. 

The precise arrangement between online sellers and dropshipping third parties can vary. Usually, however, the steps are as follows: 

• Dropshipper and seller sign agreement 
• Consumers places order 
• E-commerce operator receives customer order
• Consumer gets confirmation of order 
• Order is sent to dropshipper
• Order is shipped by dropshipper
• Consumer gets product

Online sellers offering generic products may benefit from dropshipping. At the same time, dropshipping may impede sellers’ ability to grow their brand. Dropshipping also leads to price competition between businesses, which can lower your margins. 

Can I Dropship on Amazon?

Yes! Amazon allows sellers to use dropshipping on their platform, as long as you follow the company’s policy. Adhere to the rules listed below in order to comply with Amazon’s dropshipping policy: 

• As a seller, you need to be identified on invoices, packing slips, external packaging, and anything else that comes with the product. Product packaging materials or product descriptions should not specify the wholesaler, supplier, or manufacturer. 
• Take responsibility for returns, both accepting and processing. 
• Maintain compliance with Amazon’s seller agreement Terms of Service. 

Customer confusion can arise if you include any information other than who you are as the seller. Amazon requires that you be the sole seller of record and single identifiable seller of the products you offer consumers, per the agreement you make with a dropshipper. 

The Details of Dropshipping 

The Details of Amazon Dropshipping

The Seller of Record (SoR) is you! As the seller, you are the one who is identified to the customer. As such, you are responsible for determining the price of products, for documenting your revenue, and for sales tax. You are the owner of the goods prior to their sale to the customer. So even though the dropshipper stocks and ships your products, you are the seller of record. 

Benefits 

Dropshipping means you don’t have to store or ship goods, therefore, your overhead costs will be relatively low. Similarly, using a third party supplier will keep your starting costs low. If you are looking to invest a smaller amount of money, dropshipping may be the way to go, as you will not need a facility or many resources. By extension, it is low risk. You are less likely to lose money because you won’t have to stock inventory. Another attractive feature of dropshipping is that it works for multi-channel selling. You can sell products on your own website, on Amazon, or social media. The final benefit is that you have the flexibility to work from virtually anywhere when you use dropshipping. 

Downsides 

The competition is fierce within the dropshipping sphere because of the low cost. Your exclusion from the fulfillment process may prevent you from guaranteeing and overseeing the quality of the products sold. With dropshipping, differentiation from the competition may prove difficult. The brand of goods you offer could be very similar to those offered by your competitors. Dropshipping can affect your profit margins. If you consistently sell at lower prices to beat out the competition, you may lose money over time.

Handing over the reigns to a supplier means you will not be able to control the order selection, packaging, or the shipment. Likewise, you might not have the ability to obtain updates on the availability of your products, and what is or isn’t in stock. So, if someone orders a product that is out of stock, it can negatively impact your reputation. Limitations may arise when it comes to promotions or special offers, like free shipping. If your dropshipper makes an error, issues can arise for your business. And, because of all of the above, you could end up taking over customer support. 

Fulfillment by Amazon (FBA)

Fulfillment by Amazon (FBA) is an alternative dropshipping option provided by the platform. Using FBA means that your products are stored in an Amazon fulfillment center. You get swift delivery with Prime Shipping, Amazon manages customer service and handles returns, and the platform will inform you when your stock needs replenishing. Once you select the goods and quantity for Amazon to fulfill, you send them in. Then, the Amazon fulfillment center receives the orders, and packs and ships the goods for your business. 

Things to Consider When Starting a Dropshipping Business 

Try to select a niche area of the market so you can build a brand that offers unique products. By setting yourself apart from the competition, you can more effectively cater to your audience and market specifically to those customers. Research your competition to determine whether the niche market you are considering is saturated. Obtain a dropshipper with a solid reputation, one known to be accurate and which handles deliveries on time. Make an e-commerce storefront to give customers a brand-specific destination. Market your business using paid ads and social media to increase traffic to your products. On Amazon, you can get a better search results ranking with advertising. Amazon also offers an analytics dashboard, so you can monitor the data to understand trends and customer behaviors. 

When searching for a dropshipper, be very discerning. Communicate directly with the manufacturer, review the dropshipper’s website, read as many reviews as possible, request samples of the products you want to sell, and engage with their customer support to evaluate their response time. You may also want to inquire about the dropshipper’s return policy, total fulfillment speed, if they offer insurance for orders or fraud protection, if tracking numbers are issued, the billing process, the terms of the agreement contract, what they charge for each sale, and if there are any handling or additional fees. Up next we will be discussing Selling on Amazon for Beginners.