What is Amazon Dropshipping and How Does it Work

What is Amazon Dropshipping and How Does it Work

Are you looking for a way to start selling on Amazon but don’t want to spend the time or money? Try Amazon Dropshipping!

If you ask any experienced e-commerce seller how to start selling products online without breaking the bank or spending too much time, they will tell you that drop shipping is the way to go.

An entrepreneur will want to try Amazon Dropshipping – Significant returns can be generated using Amazon Store Dropshipping as a sales channel for your business. But how does Amazon dropshipping work? And how can you turn it into a profitable venture for your e-commerce business?

This step-by-step guide will explain everything you need to know about Amazon dropshipping, including dropshipping definition, pros and cons, How it can be profitable, and how to dropship on Amazon.

What Is Amazon Dropshipping?

Amazon dropshipping is an online business model where sellers list products on the Amazon platform and do not maintain inventory. Amazon dropshipping is an online business delivery method whereby a seller delivers orders on behalf of a manufacturer, distributor, or supplier. When a customer purchases a product, the seller uses its supplier to fulfill those sales.

Sellers list their products on Amazon in the dropshipping model. This creates a situation where sellers focus on marketing and selling without worrying about inventory and Amazon seller account management. However, it is a means to comply with Amazon’s policies and ensure the use of trusted suppliers to maintain customer satisfaction and prevent potential issues.

Does Amazon Allow Dropshipping?

Yes, Amazon lets you drop ship to the marketplace as long as you follow a few dropshipping rules:

• • Always be the seller of record of the products.
  • Identify yourself as the seller on the packing slip, invoice, or other document. 
  • Remove all third-party seller identifying information invoices, outer packaging, packing slips, etc. Before shipping the order.
  • Be responsible for accepting and processing returns.
  • Follow Amazon seller agreement and dropshipping guidelines and policies.

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What Is Amazon Dropshipping Business Model?

In the Amazon dropshipping business model, you promote products and offer an online storefront. When a customer makes a purchase, you send the order to the drop shipper and let customers know that their products are on their way.

The rest of your physical recovery process is out of your hands. While the dropshipping service manages the physical goods and fulfillment, some dropshipping agreements allow you to handle customer care as well.

1. Seller Of Record

The dropshipping process starts with you. As a Seller of Record (SOR), you are identified as the seller of the product to the end consumer. You set the price, record the purchase as revenue, and take responsibility for sales tax on any sales. Even when a third party stocks and ships the goods, you are still the seller of record because you already have the products with you before they reach the customer.

For Amazon sellers, dropshipping service is generally permitted by the Amazon Dropshipping Policy, as long as you are a seller of record and identify yourself as such.

2. Manufacturers

Manufacturers are making products for sale to wholesalers and retailers. You can buy materials from manufacturers, but they may require large quantities. Buying it could potentially be an obstacle to starting or growing your business. Some manufacturers may offer dropshipping services.

3. Wholesalers

In a typical product supply chain, FBA suppliers and wholesalers buy from manufacturers and sell to retailers at a nominal markup. They act as middlemen; Generally, they do not sell to end consumers but may provide drop shipping services to retailers.

Determine which dropshipping provider may be right for you based on your business model and fulfillment needs, among other factors.

Amazon Dropshipping: Advantages and Disadvantages

In e-commerce, there are pros and cons to any fulfillment approach, the gain is worth the pain, but it largely depends on your goals and business situation. Here are the potential advantages and disadvantages when considering whether Amazon dropshipping is right for your business.

Amazon Dropshipping: Pros

1. Overhead Costs: Since you don’t store or ship the products, dropshipping minimizes overhead costs, such as maintaining a storage facility or shipping products to customers.
2. Start-up cost: Dropshipping is a good option for new entrepreneurs who want to start a business without capital outlay because they do not need to buy tools or other resources to fulfill orders.
3. Less Risk: Since you don’t have to pay for inventory, there is less risk of losing money due to lost goods or over-ordered products.
4. Multi-Channel Selling: You can use drop shipping for your business while selling on your domain through stores like Amazon and social media.
5. Place of Operation: Dropshipping allows you to fulfill orders regardless of your location of operation, opening up the possibility of working from anywhere.
6. Scalability: Leveraging suppliers can make it possible to accept more orders without increasing your store, package, and shipping inventory.
7. Wide variety of products: Depending on your agreement, inventory may not need to be purchased in advance, so you can sell a range of items and increase your earning potential.
8. Flexibility: Not sure what item to sell? Dropshipping allows you to test different items without losing your investment and see which product sells the most.

Amazon Dropshipping: Cons

1. Competition: Dropshipping business model is very competitive because it is easy to start and maintain. It requires very little startup money and expenses.
2. Product Quality: Dropshipping minimizes your involvement in the order fulfillment process. Reducing your ability to monitor products and ensure quality.
3. Branding: Because the products you sell may not be unique or distinguishable from similar offerings by other sellers, you may have trouble differentiating your offering.
4. Profit Margin: Having little or no product differentiator means your business can compete more aggressively on price. Selling at a low price can reduce your profit margin.
5. Fulfillment Timeline: You lose control over order selection, packaging, and delivery when a dropshipping service manage the fulfillment process.
6. Inventory Management: Minute-to-minute stock updates are not available. When a product is out of stock soon after a customer orders it, the brand may face a poor customer experience.
7. Limitation of Offers: Because you do not manage order fulfillment, you may be limited in special offers and promotions, such as bundling or free shipping.
8. Supplier Issues: Low-quality drop shippers’ mistakes can result in defective orders, loose packing, and missing products.

How To Dropship On Amazon?

Now that you understand more about dropshipping on Amazon and how it works, here’s how you can get set up as a drop shipper.

Step 1: Create An Amazon Seller Account

The seller must have an active Amazon seller account to sell on Amazon. You can get it by visiting salescentral.amazon.com. There, Amazon will provide you with two options for the type of account you can start with, Personal or Professional.

Step 2: Find A High-Demand/Low-Competition Product

You can use a tool like Jungle Scout’s Opportunity Finder to find high-demand/low-competition product opportunities. And while you may have your metrics to use to find such products, the Amazon expert consultant recommends starting with the following criteria:

• 100-300 units of sales per month
• Set competition from “Very Low” to “Low.”
• Set an average monthly price between $20-$70
• set niche score to 7+

This will allow you to see the number of products in different categories.

Also, when starting, keep things simple. Home goods, sports, outdoor, patio, home, and garden are great categories for beginners because they are low maintenance.

Step 3: Check Website To Find Products

Once you have some product ideas, you need to find a FBA supplier. The connection of dropshipping products is Aliexpress. It is a business-to-business website that connects e-commerce entrepreneurs with suppliers who want to dropship their goods.

Simply type in search terms for the product you’re interested in selling, and just like Amazon, a variety of products will come up. Once you click on any one, you are provided with several details. The example above shows that the notebook/agenda planner costs $3.22 with free shipping in the US.

The seller also offers 60 days of buyer protection on the product. It sounds good, but pay attention to the delivery time over a month! When using Aliexpress to fulfill your dropshipping orders, contact the supplier so they don’t send orders with their company information. Amazon has prohibited it.

Step 4: Create an Amazon listing

After you have a product idea and a supplier to fulfill that product, you must build an Amazon product listing.

In Amazon Seller Central account, go to Inventory > Add Products. Click “Inventory > Add Product” when the Add Product screen appears. When the Add Product screen appears, click “Create New Product Listing.”

First, you need to choose your product category. Then, once you’ve done that, you’ll need to fill in the information for the listing. Enhance your product listing with Amazon enhanced brand content. This boosts brand storytelling, customer engagement and conversions.

Don’t forget to account for Amazon’s fees when setting a price for your drop-shipped product. If you are a professional seller, you must pay an 8-15% referral fee, depending on the category. An additional charge of $1.00 per sale also pays by individual sellers.

Finally, as soon as you’re ready, you can publish your listing and start selling.

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