There are countless reasons why you should start a selling business on Amazon. This massive e-commerce platform takes first place among the most popular purchasing platforms in the United States, with more than 300 million active customers around the world. Amazon has established an exceptional relationship with clients over the years, and by trading on Amazon, you can benefit from that trust and build an excessive list of customers.
You've heard about many people earning six figures owning a selling business on Amazon, and you've dreamed of starting your own. But there are a few obstacles you need to pass to get there. One of the most common difficulties for people who want to start selling on this platform is a lack of capital. You eager to start, but you haven't saved any money that you can invest in your inventory. Luckily, there is a way for you to start even with a few pennies in the pocket.
Experienced e-commerce sellers say that one of the best ways to start selling items online without breaking the bank is dropshipping. With this selling model, your online store can start operating pretty fast, and you don't need to invest in your product inventory at all. Also, this selling model lets you focus on your customers, marketing, and business strategies that will help you make a significant profit. At the same time, suppliers deal with order preparation, packing, and shipping! But unlike the Amazon FBA model, this won't cost you extra money! Sounds amazing? Let's dive into it!
What is dropshipping?
With dropshipping, you will be selling goods without dealing with stocking inventory or shipping the products. The product manufacturers produce the product, manage inventory, and dispatch the items to the buyer. Sellers who trade with dropshipping can set their own prices for products, while suppliers fulfill orders. Usually, customers aren't aware that products came directly from the manufacturer and sellers who use this e-commerce method reposition the sold products as their own.
Aldo, it doesn't seem very easy at first sight, dropshipping is pretty straightforward for sellers. To simplify the complexity, in the following image, you can see the illustration of how dropshipping actually works.
- The first one (or last, it depends how you look) in the chain is a customer who purchases your item from Amazon.
- After the purchase, once the transaction is completed and you have capital, you buy the product your customer ordered directly from the supplier, providing the buyer's information for the delivery.
- The last step is on your supplier. The manufacturer or supplier sends goods straight to your customer.
Benefits of dropshipping on Amazon
No inventory management
One of the best perks of dropshipping is that seller doesn't need to carry any inventory at all. Sellers have much less work to do since they won't be managing the inventory in any way. Also, this e-commerce method is less risky for the dropshipper. Seller doesn't hold responsibility for storing goods, and therefore there is no need to pay the warehouses and staff to take care of the stocks.
Fewer skills are required
In order to run a successful business, dropshippers need to acquire fewer skills than an old fashioned seller. Sellers who use dropshipping as their selling model need to be good at administrative tasks, marketing, and they need to provide excellent customer service to their buyers. If one manages to comprehend those skills, his business will ultimately grow.
Since dropshippers don't have to deal with inventory or the prices related to product delivery, they can intensify the marketing strategy. Administrative tasks include order processing, paying taxes and other expenses, etc.
Lastly, but not least important, dropshippers must maintain a positive relationship with its customers by providing excellent customer service.
When you're selling products with dropshipping, you can easily test how products perform on the market without any risks, since you don't hold the actual inventory.
By advertising products, you can see which ones convert the best, and you can easily remove those that don't have a high conversion rate. Since you didn't buy inventory, there's no actual loss, aside from promotions, if you decide to remove a low performing product from your listing.
Low start-up costs
This e-commerce selling model has almost no starting costs because you only purchase goods when customers place an order. Also, you don't need warehouses to store your goods nor additional staff to take care of your product shipping.
Dropshippers pay the cost for product promotions, websites, and goods when the customers already purchase them.
Amazon is sourcing suppliers who are purchasing goods in bulk, within Europe. Then, Amazon stocks these product supplies in their warehouses, waiting for them to be ready for shipment to buyers while handling returns and customer service simultaneously in multiple languages and areas. Thanks to Amazon, even small businesses can sell worldwide.
Amazon's account managers assist suppliers and help them guide their business strategically, to grow their business ultimately and make a significant profit.
Amazon has more than 300 million users worldwide. Sellers who choose this online platform for their business have an opportunity to make massive returns.
Choosing the right product and price can draw new customers, and therefore more profit. Amazon lets you use their network of customers, so you have a chance to reach those that don't fit your target demographics.
Lower product promotion costs
With Amazon product promotions, you can obtain more sales and build an excellent seller reputation on this massive online platform.
But also you can benefit from high organic traffic. If you optimize your listings good enough, your customers will find you easily, and your rankings will be better than competitors'.
Another great thing about Amazon ads it's that they let you control how much you will spend on promotions. There is no minimum requirement, and you can customize ads by your budget.
Downsides of dropshipping on Amazon
Aldo Amazon has a worldwide market and great benefits for sellers who dropship, it also has several downsides, especially since they have restrictions that prevent sellers from trading on this e-commerce platform.
Amazon allows dropshipping but only for sellers willing to use their FBA (Fulfillment By Amazon) program. That's why it may be a bit overwhelming for newbies to understand how dropshipping on Amazon works at first.
All sellers that wish to trade with dropshipping need to use the Amazon FBA selling model and align with their Dropshipping policy.
Is Amazon dropshipping legal?
It is, Amazon will allow you to dropship products on their platform, but with two exceptions. You can't buy items from another online retailer and ship the goods directly to your customers. You must also ensure that all business information on packages is listed o you and not a third party person or business. All dropshipping returns and complaints of your customers must be resolved by you and not your supplier. You must comply with all Amazon policies and agreements. If you follow these rules, you can trade with this business model with no issues.
Amazon dropshipping Policy
Allowing a third-party to fulfill your customers' orders or drop shipping is acceptable, but you always need to:
- Input your business information and represent you as a seller and not a supplier or a third-party person;
- Name yourself as the merchant of your goods on all packing slips, external packaging, invoices, outer packaging, and other information involved or provided in connection with them;
- Before you dispatch your order, you must remove any external packaging, slips, invoices, or other information naming a third-party drop shipper;
- Seller is responsible for any customer product returns;
- The seller must comply with all other terms of their seller agreement and Amazon policies.
Examples of drop shipping that is forbidden:
- Purchasing goods from another online retailer and letting that retailer ship goods directly to consumers, if the package does not name you as the merchant of record or if anyone other than you (including the other online retailer) issues the packing slips, invoices, or outer packaging; or
- Packages with packing slips, invoices, external packaging, or additional information that indicated a seller name or contact information other than your own.
How dropshipping on Amazon works?
Before we show you how it works with Amazon, let's take a quick look at how you would do it with your own e-commerce store.
If you are using this selling model, you are listing products for sale without actually owning them, or holding them in your inventory. Once you have received an order from your customer, you notify your dropshipping supplier about which product you need along with the customer's shipping information. Then the supplier or manufacturer fulfills that order on your behalf, sending the product directly to your buyer.
But because of Amazon's strict dropshipping policies, things are different when you want to dropship on this online selling platform. A supplier can't fulfill your orders, but he can send products to Amazon fulfillment centers, which will ship products to customers. Aldo, this doesn't fit with the traditional dropshipping, it's just a way to go with Amazon. You can find plenty of products on Amazon that are actually from Aliexpress, but sellers are importing them from this website to Amazon's warehouse from where the product will be shipped to the buyer.
Amazon FBA (Fulfillment by Amazon)
Since Amazon isn't allowing suppliers to ship your orders directly to customers, you will be using Amazon FBA, which will pick, prepare, pack, and ship orders on your behalf to your customers.
How Amazon FBA works?
First, you need to set up your Amazon FBA account. If you already have account for selling on Amazon, you can just add the FBA to your existing account, you don't need to create a new one.
After you associate your account with the FBA selling model, you need to make product listings and prepare them.
Then, you need to ship your products to Amazon's warehouses from where Amazon employees will manage your products and orders:
- They are responsible for picking, preparing, packing, and shipping your goods to buyers.
- Amazon will provide tracking information on customers' orders directly to them.
- Amazon is also responsible for customer service. In case there are any product returns, Amazon will manage them as well, but they may forward highly precise product inquiries to you from time to time.
Amazon FBA isn't free, and you will have to pay all fees related to Amazon Fulfillment. The cost of FBA expenses varies according to product size. For lightweight products, you will pay around $3+, while the fee for heavier and bulkier products will be higher.
Sellers who use the FBA selling model will have this information listed on their product page. You're probably asking yourself why this is necessary. By doing this, Amazon increases your brand legitimacy, which is especially important if you are a new seller on the platform. Customers tend to trust more to Amazon than to any new store on handling the shipping and delivery. And for the right reasons, new small businesses are more likely to mishandle the delivery than Amazon.
With Amazon, buyers are sure that their products will arrive unharmed and just on time. In case there is an issue with the delivery, customers know they can quickly reach the customer service department and resolve the problem on a dime. Also, with FBA, sellers have the ability to offer Prime shipping to their customers.
Customers are more likely to purchase products from sellers who offer the prime shipping option. For example, one seller will ship orders to customers within five days, while sellers who use the FBA model offer two-day Prime shipping for free. What do you think, which seller customers will go for?
Sellers who are using the FBA selling model are more likely to obtain the Buy Box . If you don't know what the Buy Box is and what it serves for, we will show you in one simple example.
You're selling the Harry Potter and the Prisoner of Azkaban DVD on Amazon. This is not quite a unique item, so many other sellers will list this product as well. The Buy Box is placed on the top right corner of the product page, and only one seller gets a chance to gain this highly coveted spot. The Buy Box is essential because 82% of all Amazon sales happen through this button. If you don't win the Buy Box, this is where you are going to end up:
Even if customers scroll down that much, there are so many competing factors that they reasonably won't notice a tiny box displaying the other merchants. That's precisely why this option is so important, and only sellers who use the Amazon FBA have a chance to obtain it.
How to start dropshipping on Amazon
We already mentioned how you should set up your Amazon account for the FBA selling model. We will explain in detail how to do it, but first, you need to do some research and find the perfect supplier you want to operate with.
Search for suppliers on marketplaces like SaleHoo or AliExpress, but keep on your mind that you can come across certain issues such as language barriers because suppliers are often manufacturers from distant countries like China.
After you have found the perfect supplier, you need to set up your Amazon account and store. First, create your Amazon seller account. When you're creating your account, you can choose between an individual seller or a professional seller account. If you plan on running a selling business, we recommend you go for the professional selling plan. It will provide more benefits and will eventually be a less expensive choice.
The next step is to choose your product category and get approved by the Amazon to be able to trade products within these categories. Keep on your mind that specific categories have unique requirements and restrictions.
After you get approved to sell products within your chosen category, it's time to create your listings. Since you're dropshipping, products that you are going to sell most probably already exist in Amazon catalog, so you need to:
- Search and find the item you wish to sell
- Make sure it's a suitable format and edition
- Choose the "Sell yours here" button
- Describe the state of the item, and fill the product description appropriately
- Place your price, shipping methods, and everything else required
In case that product you wish to sell doesn't exist in the Amazon catalog, you need to create it by using the Add a Product tool, by creating the Product Detail Page. Don't forget that your product description needs to be realistic, and your product images must follow strict Amazon rules for product images. Your main product image, for example, needs to be professional, on a plain white background. Make sure your supplier can provide pictures that follow Amazon requirements, or else you will need to pay for the professional product photography.
If you want to enhance even more sales for your products, you can invest some money in Amazon's Sponsored Products Ads.
Tips on selling and dropshipping on Amazon
Getting reviews on your products
The more reviews your products have, the higher the chance customers will consider your product as trustworthy, and they will most likely pick your item for purchasing.
Reviews also influence your Amazon search rankings indirectly. Reviews lead to higher sales conversion rates, and therefore your product will be featured on amazon more prominently.
If you have just a few reviews on your products or you don't have any at all, you know how hard it is to be picked by customers among fierce competition.
One of the ways sellers used to obtain more reviews was by offering freebies or discounts, but this is now prohibited on Amazon, so don't even try it. You may be banned permanently. Also, any kind of manipulating with reviews is strictly prohibited. Your family members, friends or any other people with personal connections can't leave reviews on your product listings. Amazon is pretty good at discovering these connections, and you can get banned for using your friends and family to boost your rating.
You can remind your customers to leave you a review with only one e-mail sent with Amazon's feature Request a Review . Any additional customer contacting is strictly forbidden.
Another way to obtain more reviews is by enrolling your products to Amazons Early Review program created for products with less than five reviews. Also, another feature from Amazon is their Vine Program. You can enter this program with products that have less than 30 reviews. Then, you'll need to send products to Amazon, which will forward them to Vine Program reviewers, test your items for free, and leave an honest review.
SEO for your products and Amazon store
The all-mighty SEO also plays a significant role in your product and store enhancements. By optimizing your product listings and store, you will appear on the top of Amazon search results, and therefore your products will obtain more sales.
When you are typing your product title, be precise, and use elements such as:
- Product line
- Material or key feature
- Product Type
- Packaging and Quantity
Also, make sure you use relevant keywords in your product description too. Don't use the same keywords you used for the product title, be more creative, and think about things people type when they are conducting a search to find products like yours. Include the long-tail keywords in your product description, for example:
- Truly lifelike hand-crafted Siberian tiger, nearly life-size
- Dramatic and realistic markings
- Made from delicate polyester fabric
- 20"H x 65"L x 20"W
- Fitting for ages three years and up
- Machine washable on tumble dry low, long-lasting and durable
- Great as a gift for children's' birthdays, Christmas and holidays
Win the Buy Box
As we already mentioned above, sellers who use the FBA selling model get a chance to win the Buy Box! But there are other things you can do to win this precious feature on Amazon.
You need to ensure your landed price is lower than with your competitors. The landed price is your product price plus the price of the shipping. Also, if your customer performance metrics are better than of your rivals, it is okay to price your product slightly higher and still maintain the share of the Buy Box.
Also, pay attention to your POP Score. This score assists Amazon to conclude whether customers get a great experience when buying from you, and it takes into account:
- Negative feedback
- A-to-Z guarantee claims
- Late shipments
- Buyer-initiated messages