Dropshipping on Amazon – Is it a Sustainable Business Model?

  • Dilawar Hussain
  • Oct-23-2018
Spread the love

If you are not interested in Amazon FBA because of high upfront costs or a large stock of inventory then you are going to love drop-shipping.

Dropshipping lets you bypass the keeping and managing inventory part because of the manufacturer/supplier ships the products on your behalf while you only focus on bringing in sales.

Most newcomers to the ecommerce industry often wonder if it’s possible to start dropshipping on Amazon or even if it’s a good idea to do so.

Well, honestly, you are better of dropshipping with Shopify, but that doesn’t mean you can’t do it on Amazon. You can dropship on Amazon as well, but there are certain limitations as to how you can do it.

In this article, we are going to cover everything related to Dropshipping on Amazon, so you can make up your mind whether you want to do it or not.

However, before we go ahead with the process, you need to understand Amazon’s dropshipping policy. Here’s what you need to know.

Amazon Dropshipping Policy

Amazon has a clear and straightforward policy for dropshippers. They have very strict rules for dropshipping businesses and ignoring any single rule will get you in a lot of trouble with the ecommerce giant which mainly includes getting your account banned from any further operations. So, you should always ensure that you are following the guidelines provided by Amazon for your dropshipping venture.

Below are the guidelines that Amazon has published for dropshipping on their platform.

The type of dropshipping that is not permitted on Amazon is when you purchase products from another supplier and have that supplier deliver the products for you.

Now, this is what regular dropshipping is supposed to do. Supplier ships the products on your behalf while you don’t have to worry about the logistics, but Amazon doesn’t allow that.

Also, you need to ensure that the packages don’t include the supplier’s information at all. On packing slips, invoices, or any other informational document, the seller name should only be yours and not the supplier’s. Otherwise, Amazon will shut down your operations before you can ask “Why?”

You are also responsible for dealing with customer returns since the supplier is not supposed to be in touch.

In simpler terms, Amazon really tries their best to deter traditional dropshippers away from its platform with such strict rules. But, the question remains..

Why Dropship on Amazon? Or Why not?

Let’s see what are the benefits and disadvantages of dropshipping on Amazon. We are going to list the pros and cons of Amazon drop shipping so you can see if it’s even worth the effort to dropship on this platform.

Dropshipping on Amazon – Pros

Here are the advantages of dropshipping on Amazon.

Large audience: This one is pretty obvious. Most people often struggle when trying to get traffic to their ecommerce websites, however, if you are selling on Amazon then most of your traffic issues are taken care of by Amazon itself. Millions of people visit Amazon every day which means you get millions of potential buyers and views on your products. If you were selling on your own website then you would have to work on the marketing yourself, but selling on Amazing provides you with free marketing from the ecommerce giant.

Easy to set up: Another problem that ecommerce entrepreneurs often face when starting their dropshipping business is the set up part. If you are looking to start your own business then setting it up can be a tough part if you are not technically savvy, however, Amazon makes these things quite easier for everyone. Even if you are a newbie, Amazon makes everything simple and straightforward when setting up shop on the platform. So, you don’t have to worry about getting a domain, setting up hosting, etc.

Dropshipping on Amazon – Cons

There are more dis advantages to dropshipping on Amazon than there are advantages. Here are some of the downsides of Amazon dropshipping.

Can not build a brand: This is a given when building a dropshipping business on Amazon. The brand will always be Amazon, no matter how many products you sell. As long as you are using Amazon for selling the products, then you are losing out on building a brand for yourself. If you build your own online store and dropship products on it, only then you will be able to create a brand around your business otherwise you will just be adding to Amazon’s brand authority.

No access to customer data: This is a big one. Amazon does not provide you any customer emails, so you can not build a list for email marketing at all. Amazon also tries to deter sellers from contacting the customers. Losing the ability to build an email list is a big blow to an online business, so this is one of the more serious downsides of Amazon dropshipping.

No control over your store: You are not in any control over your Amazon store. Amazon can terminate your account at the drop of a hat without any explanations at all. It doesn’t matter if you break a rule once or just come close to breaking it, Amazon can shut you down without providing you with any details and your precious store will vanish from the world wide web with no traces.

No control over customer support: Amazon deals with all the customer complaints and issues through their official support channel They never forward any customer queries to the seller except for a few queries. So, most of the time you wouldn’t even know that customers have a problem with their order. Also, this lead to more refunds/returns since Amazon loves giving out refunds especially when the products are sold by a third-party.

Low profits: This is true since Amazon provides you with a platform to sell, free marketing of products, and entire ecommerce infrastructure, they also take a deep bite out of your revenue. Even after you pay the monthly fees for Amazon Professional seller account, Amazon also takes around 15%-20% on each sale. So, your profits margins go down even further.

Can You Dropship with Amazon?

Still, want to dropship on Amazon? Well, if you are still keen on doing it then we’d like to tell you that it’s definitely possible. There are workarounds that will help you create a dropshipping business on Amazon without running into any trouble with the online retail giant.

First of all, you should know   Amazon thrives on its fast delivery with its Prime shipping and even regular shipping being quite fast. So, customers don’t really like it when you ship their orders after 2-3 weeks (which is quite normal when dropshipping from China). So, your best workaround is to work with local dropshipping suppliers from your region.

If you are dropshipping on Amazon USA then get dropshipping suppliers from the USA. Make sure they deliver products quickly to avoid running into any problems with your customers. Afterward, you need to communicate with the supplier and ask them to not include any information, invoices, packing slips, etc that have their name on it instead they should put your name on the packing slips and invoices. (Otherwise, Amazon will boot you off the platform).

Once, you’ve got yourself a reliable local supplier that agrees to your terms, it’s time to get your shop up and running.

Here’s how to create a seller account on Amazon in a few steps.

Whenever you get an order, you will have to manually send the order details to your supplier who can then start working on fulfilling the order.

Once you receive the tracking information from your supplier, go to your Amazon seller dashboard and hit “Confirm Shipment” on the related order. Add the shipment details and you are done.

How and when does Amazon pay?

Amazon puts at least a week’s rolling reserve on each transaction which means that you won’t be able to withdraw our earnings until at least a week has passed from the expected time of delivery for the order. The duration for rolling reserve is even higher for a brand new account, so you should always have money saved up to pay for the products because your supplier won’t be working with you on a 7-day rolling reserve.

Can you Dropship with Amazon Prime?

No, Amazon does not allow it’s regular sellers to sell with Amazon Prime. Amazon Prime features are only available to sellers that sell with Amazon FBA. Since FBA requires you to have your entire stock shipped to Amazon warehouse where it’s easier for Amazon to handle the logistics for your inventory, only then your products will be eligible for Amazon Prime so these can be delivered with Prime shipping times.

Here’s how you can start your Amazon FBA business.

Dropshipping on Amazon Vs. Shopify – What’s better?

Without a single shadow of a doubt, Shopify is the best way to go about dropshipping. They provide you with a plethora of tools like Oberlo to make your dropshipping venture as smooth as possible and there are no restrictions either. Also, Shopify doesn’t meddle in your affairs as long as you are not breaking any terms of service.

Shopify also allows you the ability to build your own brand and you can even scale your business to create a full-fledged ecommerce business if dropshipping doesn’t sound as lucrative down the line.

Amazon, as already mentioned, puts all these restrictions on dropshippers and makes it really hard for entrepreneurs to do any dropshipping activity easily. You are better of using Amazon FBA for fulfillment and storage rather then dropshipping on the platform.

If you are really keen on starting a dropshipping business then my personal recommendation would be to choose Shopify over Amazon and save yourself all the hassle of dealing with Amazon’s strict rules and guidelines. Their seller support is also quite bad compared to their customer support.

Check out our Shopify Vs. Amazon comparison.

Most articles on Amazon dropshipping are quite misleading regarding the procedures and the entire process. According to Amazon’s dropshipping policy, a seller can not dropship from another online retailer such as Oberlo which means you can’t use a tool like Oberlo to import products and dropship them on Amazon. Most of these articles make it out as if dropshipping to Amazon customers is a viable and sustainable business model (and also try to sell you tools to do so) which it’s CLEARLY not so you are better off putting your effort into building your own dropshipping store (or starting an Amazon FBA business)

Conclusion

Hopefully, this article helped out in some way. If you were really excited about Dropshipping on Amazon then I apologize to burst your beautiful bubble. However, this is the truth even if you don’t like it.

I’m telling you this because I have seen countless newcomers burn themselves out by trying to comply with Amazon’s rules while drop-shipping on the platform only to end up with a fistful of nothing.

You might see that one person doing really-well drop-shipping hundreds of products on Amazon, but that’s not a sustainable business in the long run. They will never be able to build a brand around their business, and one slip-up could lead to the demise of their so-called business.

So, you are better off starting your own dropshipping business with your own online store like Shopify which is sustainable and easy to scale in the future.

If you learned something from this post, then please leave a comment letting us know what you think. Even if you don’t agree with the post, we’d like to hear your thoughts on the subject and how you’d go about dropshipping on Amazon.

Related Articles

Written by Dilawar Hussain

Dilawar Hussain is a professional blogger who loves gaming, technology, and ecommerce. He spends his time testing new strategies, hacks, and tricks to help the ecommerce community.

Leave a Reply

Your email address will not be published. Required fields are marked *