If you’re not familiar with the term, then your reaction may be ‘drop what?’ But don’t worry, this post will show how drop shipping is incredibly simple is. While the various permutations of drop shipping vary depending on which channel you use, we’ll be narrowing the focus down to how it works on Amazon.
Drop Shipping: Eliminating the Tediousness
You as the merchant engage in drop shipping if you avoid the stocking and shipping part of your business and have the manufacturer or wholesaler do it instead. Somebody has to be in charge of that part of the operation, but it won’t be you.
What’s neat about drop shipping is that you never have to worry about first buying your inventory before listing it to sell. In fact, you wouldn’t really have an inventory to speak of, with that part belonging to the supplier. What you’d be in charge of is simply listing the product and then liaising with the supplier to get said product to the buyer.
Another neat aspect of drop shipping is that you can jump in and out of markets with relative ease. The investments you’ll be making are relatively lighter than if you also played the role of supplier, with product promotion being your main task. If you’re good at identifying hot markets and making products sound terribly exciting and appealing, then drop shipping may be a good venture for you to consider.
How to Dropship on Amazon
While explaining the nuances and instinctual aspects of finding a hot market and capitalising on it warrants an article of its own, the technical aspects are much simpler. We’ve managed to distil the steps you’ll need to follow into a few easy to follow ones, so here they are in order:
- Link up with a supplier so you can list their products on Amazon. You’ll have to make sure this supplier is willing to ship directly to the buyer so you won’t have to, but once you do that, you’re free to start creating listings of those products on Amazon.
- Create listings and sell products as though you normally would on Amazon (i.e. like it’s from your own inventory). Once the consumer clicks ‘buy’, it’s up to you to gather the money — which covers both the retail and shipping costs — from them.
- You’ll be expected to hand some money over to the supplier, but it won’t be 100% of what you just collected from the buyer. Instead, what you’ll have to shell out is usually the wholesale cost of the product and the shipping fee, along with possibly a handling fee if the supplier demands it.
- The tedious work of shipping the product to the buyer is now being done for you, and you get to sit back and count your profits. That’s it. Now the only thing left is to focus on nabbing that next sale.
Drop shipping, or allowing a third party to fulfill orders is allowed by Amazon as long as you comply with their requirements.
- Be the seller of record of your products;
- Identify yourself as the seller of your products on all packing slips and other information included or provided in connection with them;
- Be responsible for accepting and processing customer returns of your products; and
- Comply with all other terms of your seller agreement and applicable Amazon policies.
Failure to comply with these requirements may result in the removal of your selling privileges.
Pros and Cons of Drop Shipping on Amazon
This way of selling isn’t for everyone, as it requires a certain kind of personality and temperament to be successful at on Amazon. Here are some of the things you can expect if you want to take up drop shipping as a way of selling on Amazon.
The biggest one, by far, is that you’re dealing with a hugely recognizable brand. Amazon is a household name across the world and you won’t have to waste any time explaining to people just how the marketplace works. Plus, because it’s so big, you can forget about worrying about the little things, like advertising, marketing, SEO, relationship building and problem-solving.
When you sell by drop shipping, you also don’t have to concern yourself with paying for products and having them sit around collecting dust. You only pay for an item once a buyer purchases it, so the only thing you have to worry about is your listings and their fees — much cheaper.
Lastly, you can greatly expand on the virtual ‘inventory’ you offer buyers. Because you yourself don’t have a physical inventory to worry about, you can go ahead and list a far greater breadth and variety of products than you ordinarily would if you weren’t drop shipping.
Despite being able to wheel and deal in a bigger variety of products, your profits may not always reflect it. Margins tend to be thinner with expensive items like electronics, while fatter with cheaper-priced goods. The difference between the two can be pretty drastic, too, such as something around high single digits for the former and nearly 100% for the latter.
Inventory availability still matters, even if you don’t have one. Products are still coming from somewhere and your buyer doesn’t care where. All they care about it that when they click ‘buy’, they’ll get that item. Make sure you have open lines of communication with your supplier so that if they’re getting low on a certain item, they’ll tell you and you can adjust your listings accordingly. Have this go well and it can result in a Buy Box; the other end of the spectrum can result in a suspended or closed account.
Most merchants drop ship because it gives them a way to look like one of the really big sellers with a huge inventory without actually needing to invest in it. And because Amazon values qualities like low prices, high sales and good relationships with buyers, drop shipping can be one of the niftiest gateways into their good books. To ensure you have the edge over your competition, get started with RepricerExpress Amazon repricer, so your products are competitively prices. All you have to do is sign up today for your 15-day free trial, and you’ll be well on your way to a drop shipping superstar.
*A version of this article first appeared on the RepricerExpress blog