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Ever thought of dropshipping on Amazon? It’s a solid idea waiting for your attention. If you have not heard of it, please pay close attention to the details. In this blog, we are going to discuss it.
Amazon is one of the most crowded online shopping stores out there in the market. It has a 300 million user base worldwide as per a report in 2019.
The below statistics show the quarter-wise growth of Amazon web services. This includes Amazon’s online sales growth.
The above and below stats prove that Amazon is a ‘big enough cake to fill a seller’s appetite’. Therefore Amazon is the favorite destination of drop-shippers across the world. Although due to Amazon’s heavy heart for customers, there are strict policies and regulations which do not allow dropshipping in its purest form i.e. online retail dropshipping.
As per Amazon, you can not sell from one online vendor to another. However, it does allow other dropshipping integrations like Shopify, eBay, etc. Let us now discuss in detail: ‘the different aspects of dropshipping on Amazon.
The data below also shows stats of Amazon B2C earnings.
Dropshipping: Introduction to the eCommerce business
Dropshipping is a supply chain section of eCommerce in which a seller finds a retailer or wholesaler to advertise their product on his portal. He/she often acts as a ‘middleman’ and takes a margin of profit sold.
The only thing they participate in is, processing the order and alerting it to the supplier.
Dropshipping on Amazon
In order to dropship on Amazon, you must have your own eCommerce store. Dropshipping, in general, is simple: You list a vendor’s product, a customer orders your product, you contact the vendor and the vendor delivers the product to the customer.
Sounds easy? Doesn’t it? But, Dropshipping on Amazon is a bit more complicated.
Is dropshipping admitted on Amazon?
Yes is the answer. As long as you comply with the policies and guidelines on Amazon, you are ‘okay’ to go with dropshipping. Let us discuss some policies of Amazon regarding dropshipping.
You ought to:
- Be the seller of the product records. You must acknowledge yourself as ‘the seller with responsibilities’ on all receipts and documents related to the product.
- Remove any identity relating to the product that belongs to the third party before shipping the product.
- Be responsible for processing the order and customer returns.
- Comply with all seller terms and conditions.
Let us discuss some examples that do not fit with Amazon’s policies and terms.
- Purchasing a product online and delivering the same with the vendor name and address on it.
- Sending documents along with the product other than your portfolio (of the third party).
Merits and demerits of dropshipping on Amazon
Some sellers enjoy the dropshipping module of business where they need not maintain a warehouse. Whilst some struggle to increase profits as profit margins are classically thin.
Let us take a closer look into the positive and negative sides of dropshipping on Amazon.
Merits of dropshipping on Amazon
- The biggest benefit is the global presence of Amazon and more than 300 million active consumer base.
- Being on a big platform has its own benefits. You don’t need much attention on SEO, keyword optimization, etc.
Demerits of dropshipping on Amazon
Amazon’s drop shipping policy states “Purchasing products from another online retailer and having that retailer ship directly to customers” is not permitted.
This makes it difficult for those sellers who want to play by ‘the rules’ and make a profit out of the dropshipping module.
Amazon consumers have a high expectancy rate on products. An error can ruin your whole campaign of making money. It may lead to bad product reviews, leading account suspension, or even worse.
Related: Amazon Appeal Service: How to undertake with?
A major problem that comes under it is inventory management. If you do have open line communication with the vendor, you don’t need extra tension in your mind. But, if you are not you need to cope with the inventory problem. As you can not afford an inventory, you can lose a lot of money.
How does dropshipping work?: Integrating Amazon with dropshipping
Dropshipping on Amazon means the product is being sold for a higher profit margin than listed on Amazon. The product is bought from Amazon and sold to other platforms (say Shopify, eBay, etc.).
This results in the following actions afterward (if you are not ‘in-line’ with the vendor.
- The customer purchasing item on a platform (say Shopify) will ultimately receive items packed in Amazon packaging.
- He will then regret his decision and will try to buy things directly from Amazon instead, from his next buy.
- If the vendor finds that his exclusive item was on sale on Shopify or say eBay or a higher margin. He won’t be happy about it.
- This is what he does next: he buys the product from eBay (or Shopify) and raises the price on Amazon. The drop shipper is forced to cancel the order. And, therefore receives negative feedback on Amazon, ultimately leading to account suspension.
Although there are many benefits of dropshipping on Amazon, The profit margins are low. However, one can start as a newbie on Amazon. There is a lot to learn from it.
Integrating Amazon with Shopify
Create a seller central account for sellers. Once your account is approved connect your Amazon account to the Shopify store. Open the Shopify website and follow the instructions.
The snippet below shows the procedure for adding Amazon to Shopify
Online businesses: How traditionally retailers(Amazon sellers) are motivated to open an online dropshipping store?
A dropshipping business can produce a lot of extra cash if you are an online retailer already. Let us discuss some reasons that motivated Amazon sellers to move to dropshipping.
Although there have been people saying that “you cannot make a lot of money in dropshipping modules”. But in fact, this whole proverb and traditional thought are proven wrong.
Taking the example of France, as per Statista, “In France in 2019, the source had asked people who owned drop shipping businesses and those who wanted to start one, which was the main reasons to do so. Dropshipping is a three-party system where the customer places an order on the website of a reseller, who forwards it to the supplier to ensure the delivery to the end consumer. Thus, most of the respondents who were to start a business wanted to make more money (33 percent). Around 24 percent of the respondents among people who had a drop shipping business also mentioned the fact of being able to work remotely and to become an e-merchant, as one of the main reasons to start a dropshipping business in France in 2019”.
Also, the main reason to do so, as per Statista, “ In France in 2019, 25 percent of French people who owned a drop shipping business had one in the jewelry and accessories sector, and 13 percent in the fashion industry. For those who were planning on starting a business, 18 percent were planning to open it in the jewelry and fashion sector with 18 and 15 percent, respectively”.
If we talk about drop shipping worldwide the scenario is almost the same. People are loving remote work more and more. This trend has increased more due to COVID-19.
Dropshipping products: Journey from a dropshipping supplier to customer orders on Amazon
As we have seen dropshipping products have gained popularity in the era of COVID-19 as more and more people are searching for remote work. Gone are the days when people used to sell from Amazon and eBay. Sellers are renovating eCommerce these days and trying to make more and more money out of it.
The change in the era of modern times has also brought a change in seller as well as customer behavior. These all reasons combine to force or motivate a seller to move from trending business types i.e. Amazon sellers to more traditional i.e. dropshipping types.
Dropshipping profit margins: How to handle it like a pro?
Here are a few steps to handle drop shipping profit margins like a pro. Let us discuss them in detail.
- Proper product research: There should be proper product research done in order to list a product. ‘A product well researched is a product sold for higher margin.’
- Buy from the fitting vendor: You should buy your product from the apt vendor understanding your selling needs. Some vendors are there in the market just to exhaust their stock, while some can give you an enhanced margin if you know how to deal in general commerce.
- Buy in bulk: Always buy products in bulk. Pre-decide what to sell and buy the decided product in bulk. This reduces your average cost per product. And, you can sell the same product with a higher profit margin.
- Price smartly: Price your product smartly, after doing market research. This gives you ‘wings to fly’. The price should be apt enough to capture the market. For example, if you price 100 cups for $10 each which is being sold on Amazon for $12 per cup for 50 cups. Here you priced the product smartly and you will capture the market until your stock is exhausted.
- Pre-calculate your inventory capabilities: Never go blindfolded on the business module. Inventory capabilities should be well pre-calculated. This allows you to buy products in bulk foreseeing the future demand for the product.
Dropshipping tools: Some of the major tools to ease dropshipping on Amazon
Dropshipping tools were invented seeing the necessity in the product listing processes that could be automated. Let us discuss some types of dropshipping tools that have made it possible to handle multiple accounts for a single seller.
- Ecomdash: There are features in this dropshipping tool that allow the ease of dropshipping on Amazon. The prime ones are displayed in the snippet below.
Conclusion: Synchronization of Amazon and dropshipping
Concluding the topic we can say that synchronization of Amazon and dropshipping could be done using various tools as discussed earlier. Selling on Amazon has become old school now. Dropshipping is a new motivation as it has given the sellers new ways to experiment upon. Also, in this module, there is least to depend upon as a resource to start it.
Hence it’s easy to say, ‘Dropshipping is the new trend producing new captions in the market’.