This post was updated to reflect current trends and information.
What is Dropshipping on Amazon?
Amazon is a huge marketplace where products are sold not only from Amazon but also from third-party stores. Customer service is supported by the terms and conditions that are common to all vendors. Amazon is very popular with buyers and many people are shopping for their products right there on Amazon.
Concept of dropshipping – what it really is.
Drop shipping is the concept of selling by “intermediary”, where direct delivery of goods to the customer is done by the manufacturer. That is, first the intermediary finds the customer, then makes an order from the manufacturer and the manufacturer delivers the goods to the buyer.
How Does Dropshipping Work?
- The customer (or consumer) finds the product interested in at the seller; in this example, the Amazon website is the seller.
- The customer orders and pays for the product online, on Amazon’s site.
- Once the order is placed at Amazon, the “Ship To” information is obviously noted.
- Amazon will transfer the order to the appropriate manufacturer
- Upon receiving the order, the manufacturer delivers the goods directly to the consumer, on behalf of the Seller (Amazon); All paperwork (i.e. invoice, packing slip…) will look as if it was sent from Amazon since he is the Seller known by the customer.
- The manufacturer advises Amazon of the delivery of goods to the customer
- The manufacturer sends the invoice to Amazon, who in turns transfers the payment based on delivery of goods and pricing agreed upon in advance.
Useful reading: 4 Challenges of EDI and Drop-Ship in eCommerce
Get Started With Dropshipping on Amazon
If you are looking to start a retail drop ship business on Amazon, without having any manufacturing or warehousing capabilities, we recommend finding reliable suppliers that are used and capable of working under the dropshipping model. Given the great interest of manufacturers in dropshipping, this is not difficult to find.
Arrange with them your price, discounts, returns, your ability to track stock balances and how the goods move to the buyer.
But not everything is as simple as it might seem. The difficulties of dropshipping is that you have competitors (one manufacturer may have dozens or even hundreds of trading partners like you) and this will make your margin low. To make good money, you need to sell hundreds of products. You should be aware of the availability and balances of all goods in the warehouses of manufacturers in order to avoid long delivery and returns. Fortunately, there is a solution that can greatly simplify the life of a drop-shipper. We, at EDI2XML, propose an integration of your Amazon store with your supplier’s software system.
Dropshipping and Amazon Buyers
Often consumers buying from Amazon (and other online shopping platforms) do not even know (and do not want to know) according to which sales scheme they buy goods. They come to Amazon mainly because they want to quickly and conveniently place an order, have quality feedback from the seller, and quickly receive goods.
To maintain a high customer service there is a department, the Seller Performance Team, which monitors all accounts, especially new ones, and monitors the seller’s activity and customer satisfaction. Here are some criteria for evaluating an Amazon account:
- The number of canceled orders;
- The number of returns;
- Timely delivery;
- Accuracy of delivery tracking data;
- The speed of reaction to customer requests (answers to questions);
- The degree of customer satisfaction with seller support services and others.
Therefore, if most of the indicators fall below acceptable levels, and sometimes it’s only 4% of the number of transactions, Amazon’s algorithms will lower the “health” of the seller account and it will be more difficult to sell.
Amazon Dropshipping Policy
According to Amazon’s dropshipping policy, dropshipping is generally acceptable, but the seller must follow the rules. Amazon may block the seller’s account for a violation of its rules.
“Examples of drop shipping that is not permitted:
– Purchasing products from another online retailer and having that retailer ship directly to customers; or
– Shipping orders with packing slips, invoices, external packaging, or other information indicating a seller name or contact information other than your own.”
It follows that Amazon prohibits the sale of goods that will be sent to the customer by another seller. Consequently, the package should not have documents with other names than the seller.
Please also note that Amazon requires the seller to take responsibility for the transaction. Therefore, such excuses as “I did not send the goods, so, I am not responsible for its quality” will not work. Even if the seller never seen a product, the sale and the processes associated with it (delivery, return, replacement) are only his own responsibility.
Is Amazon Dropshipping Profitable?
Even with Amazon’s strict rules, dropshipping is an opportunity to start selling with minimal investment. By developing dropshipping, sellers can get exclusive conditions from a supplier or manufacturer. Most likely, despite all the conditions of Amazon, dropshipping using this marketplace will be several times more profitable than any other online store that anyone might create and develop.
A great chance to learn more about effective dropshipping
Today thousands of sellers make money on Amazon and millions of people buy goods. All conditions are created for doing business on Amazon. Dropshipping is the most convenient and affordable way to start trading on Amazon. We can help you make your business on Amazon profitable and easy. Contact us today to have a free consultation!