Is it worth starting a business dropshipping on Amazon?
This is a big question in the dropshipping world. The short answer in my opinion is NO. It seems like the obvious thing to do really, it’s the world’s largest marketplace where everyone already shops. You don’t need to worry about driving traffic to your store or paying for ads. Amazon is said to be responsible for approximately 50% of all sales online which is a crazy statistic. So let’s take a deeper dive and see why I wouldn’t recommend it.
Can you Dropship on Amazon?
Dropshipping on Amazon is permitted, however, you will need to abide by their policy. Amazon policy states dropshipping from other online marketplaces such as AliExpress or eBay to Amazon is not permitted. Any shipping orders indicating a name other than the senders are not permitted.
Packing slips and invoices must also be labeled as the seller’s information. Think about it, you order a package from Amazon and the package arrives at your door in different companies packaging and it has a different seller’s name. You’d go to that companies website and see the product you purchased at a much lower price. You’d feel scammed and ripped off.
Consumers who purchase from Amazon also expect fast shipping because that’s what they are accustomed to. With dropshipping from China you can expect shipping times between 2 to 4 weeks. This will result in dealing with more customer complaints.
Check out Amazon’s dropshipping policy if you require more information.
How Dropshipping on Amazon works?
Dropshipping usually works by you listing products on your own online store from a third-party supplier and once a sale is made the supplier ships the product directly to the customer for you. With Amazon dropshipping, the main difference is instead of selling on your own online store, you sell on Amazon’s marketplace.
This will save you money on paying a monthly fee to a website building platform and advertising costs, but you will have to pay Amazon selling fees.
Dropshipping using Domestic Suppliers to Amazon?
This leaves domestic suppliers and manufacturers to dropship from and even this can cause a few problems. Firstly, you must have your products shipped to your customers in the time frame stated on your product listing.
This isn’t normally a problem but when you leave the shipping in the hands of other people, problems can arise. Yes, this can happen on your own Shopify store too, however, this only reflects poorly on you and you can sort this out and move on. When you’re on selling on someone else’s platform, it reflects poorly onto them and they have the option to limit, restrict or suspend you from selling anymore. They are essentially your boss.
If you do go down the route of Amazon dropshipping, making sure you have a great relationship with your supplier will be crucial. You need a supplier who is reliable and understanding of your business model. If your supplier is brushing you off every time you have a problem, your business won’t last long.
If you do plan on finding suppliers in your country to dropship for you, you’ll probably find most of them won’t allow you to list their products on Amazon. If they have their products listed on a huge platform like Amazon, it can cause a price war with all the competition which in turn brings the price of the product down. Many big name brands also feel as though it cheapens their product to have it listed on these platforms.
Finding domestic suppliers to dropship on Amazon can be a tough ask. Many of these suppliers have dated websites with poor SEO and can have you sifting through pages and pages of Google to find. Even once you find them, it can be difficult to know for certain they are actually a supplier. Using a supplier directory like Salehoo can be a huge help.
Who’s Customer?
Remember when you make a sale on Amazon, they are essentially getting the customer, not you. They get the repeat business from the customer back to their platform and they get their email for sales retargeting. Yes, you make the profit from your single sale, but they may make more money from that customer in the long term.
If your entire business is solely dropshipping from Amazon, you’re essentially putting your business in the hands of other people who can stop you from running your business whenever they please.
The only real benefit of using Amazon is it’s simple and they provide the traffic source for you. Don’t rely on other people to run your business for you.
How much does it cost to become a Seller on Amazon?
If you’re just a beginner and are simply testing the waters with new products, they have the individual plan. This plan is 99c per item sold but it doesn’t have many of the selling features compared to the other plan.
Your other option is the professional plan. This plan is $49.95 a month and has many more features such as advertising tools, the ability to sell in multiple categories, run promotions and qualify for top placement on product detail pages.
With the already thin margins due to the high competition and the additional costs of Amazon’s selling fees, it makes it very difficult to make a decent profit.
Best Alternative to Dropshipping on Amazon
Why not put the future of your business into your own hands and start a Dropshipping store using Shopify. This way you decide how your business runs and nobody can cancel your business except you.
Creating your own Shopify store can seem like a daunting task to many people but it’s actually a simple process. Even a complete beginner can learn how to create a Shopify store in a day or so.
This alternative allows you to dropship products from AliExpress, eBay and Amazon to your store if you choose. Many domestic suppliers are far more likely to want to do business with you if you have your own website.
You will not be in direct competition with as many other sellers and you will be able to charge a higher price for your products.
The obvious one big disadvantage to dropshipping from your own Shopify store is traffic. Amazon already has millions of people visiting their platform looking for products. Yes, it can be difficult initially to gain traction and attract people to your store but in the long run it will be worth it.
Many people believe dropshipping is too saturated, however, there are always ways to standout out. Check out this article for more information.
Amazon FBA
Another alternative is Amazon FBA (Fulfillment By Amazon). Instead of dropshipping your products individually from your customer to your supplier, you ship a number of your products to Amazon. Amazon has hundreds of fulfillment warehouses located all over the world. You contact Amazon and tell them which products you’re selling and the location you’re selling to and they tell you which warehouse to send the products to.
This way Amazon stores, manages inventory, packages and ships the products to your customers on your behalf. They also handle all returns and a great deal of customer service. This takes a huge amount of the work out of your hands. This all sounds great but of course, they’re all always negative aspects to anything that sound this great.
- Amazon charges fulfillment and storage fees and these fees increase the longer your products sit there.
- Amazon manages the inventory of what you have sent them. But it’s your job to order more when it runs out.
- There’s far more risk involved in ordering a large number of products in one go without knowing for sure if it’s going to sell.
- Competition is fierce on Amazon which means price wars will potentially lower your profit margins.
Verdict
Overall dropshipping on Amazon is the easy option but not necessarily the best option long term. The cons outweigh the pros significantly. With building your own store you can create an asset and an email list that’ll be worth a lot of money in the long term. Amazon can shut you down as they please and you’ll be left with nothing from all your hard work.
The success of your dropshipping business depends largely on your supplier abiding by the strict policies of Amazon. If your supplier doesn’t ship the items like medicine, household items in the time frame stated, or they ship the wrong item, or they ship using the wrong packaging, you risk your business being shut down. If a supplier makes the same mistake with your own store, you have one unhappy customer instead of Amazon potentially shutting down your business.
The reason most people are looking at a business dropshipping on Amazon is that they are sick of having a job with a boss and having someone else take control of their life. You’re not really escaping this by dropshipping on Amazon. There is a very satisfying and fulfilling feeling creating your very own store front that you have full control over. Don’t let Jeff Bezos become your boss.
I hope this article helps with your decision. I have many articles to assist beginners with starting their own dropshipping business.
