Amazon Dropshipping: Hot Or Not in 2021?
Our readers and followers commonly ask: why are we only talking about AliExpress? Why don’t we consider the suppliers selling on eBay and other renowned marketplaces like Etsy or Amazon? So, our today’s article is all about the possibilities and limitations of Amazon dropshipping. Let’s figure out whether you can successfully use this platform for your business!
How do you understand the ‘Amazon dropshipping’ term?
In our experience, it’s a slightly confusing concept as people commonly use it to describe 2 strikingly different business models:
- Opening a store on Amazon and dropshipping items through it
- Opening an independent dropshipping store and filling it with the items imported from Amazon
Let’s examine and discuss these options separately.
Amazon dropshipping: selling items through the platform
There is a popular belief that one of the possible ways of using Amazon for dropshipping is turning it into a sales channel. Basically, it means opening an Amazon store within the platform and becoming one of the numerous Amazon sellers.
For a number of reasons, this option might seem quite appealing for a newcomer:
- The procedure is quite simple from the technical point of view. Indeed, you don’t have to create and set up a separate website.
- You get the opportunity to reach an incredible amount of people. According to the data from Statista, the average monthly number of Amazon’s websites’ visitors was 200 million users in 2018.
- You operate through a well-reputed platform that has gained recognition all over the world. Therefore, your store visitors will have no concerns about the reliability of your business.
Still, even though sell on Amazon is a good idea for online entrepreneurs in general, it is totally unsuitable for dropshipping.
Why you can’t legally dropship on Amazon
Amazon has several requirements that make it totally impossible to do ‘classical’ dropshipping through the platform. If you’re selling something through Amazon, then:
- You are not allowed to make purchases from other online retailers and ask these retailers to send the order directly to the initial customer
- You can not send your buyer a package that contains invoices, stickers, or other elements indicating a seller’s name or contact information that is different from your own personal details
There is a curious ‘loophope’ in this system: you may try marking your order as a gift. The packing slip will be hidden in a separate envelope in order not to let the recipient view the gift’s price – and this might seem to be a chance to cover the original seller’s identity.
But, these options are not normally available for the items sold in Amazon Global Store, and for some other products as well. What’s worse, you can only learn about this on checkout. Therefore, it’s not a really good idea to fulfil orders anyway and simply hope this strategy will work every time.
Amazon still claims that it allows selling items through the dropshipping business model – but basically, it simply means that you can use the service of Fulfillment by Amazon. In other words, you can physically store your products in Amazon’s fulfillment centers. The dedicated personnel will assemble the packages, provide the packaging services, and arrange the packages’ shipping to the necessary addresses.
Can you dropship on Amazon without stock?
As you can see, it’s definitely not the business model that would match the description of dropshipping. Instead, it’s a simple outsourcing of several business functions. What’s most important, it requires you to keep and maintain stocks of previously bought or self-manufactured products.
Let’s suppose that you physically own the items offered in your ecommerce store, and use the service of Fulfillment by Amazon. In this case you, as the store owner, must be:
- Officially recognised as the seller of record of your products. Simply speaking, you must be legally allowed to receive payments from your buyers, which means that no one but you is responsible for making refunds if necessary. Plus, you’re also responsible for calculating and paying taxes
- Fully responsible for accepting and processing product returns if necessary
- Identified as the products’ seller on all the invoices and package elements
- Fully compliant with Amazon selling policies that oblige you to pay monthly subscription fee and a referral fee on each item sold. Plus it put some limitations on the products permitted for sale and countries acceptable for seller registration.
What’s the conclusion?
The classic dropshipping model means that the original supplier arranges all the product-related issues. If you want to try it, you can’t legally use an Amazon-based store as a sales channel.
Dropshipping from Amazon: using the platform as your supply source
Now, let’s find out whether it’s a good idea to use Amazon as the supply source for your dropshipping store.
As a dropshipping business owner, you don’t simply want your supplier to be trustworthy. You also need to be sure that this particular seller has low-priced items and provides worldwide delivery option with low shipping costs. The lower is the supplier’s initial price, the higher are your profit margins, right?
In case of Amazon, it’s not always possible.
The screenshots above show nearly identical product listings on Amazon and AliExpress. As you can see, the price difference is mind-blowing. The item placed on AliExpress is 4.5 times cheaper than its Amazon competitor!
For you, as a dropshipping store owner, this is a crucial difference. Your profit margins depend on the initial product price, so choosing the more expensive option is simply unwise.
In terms of delivery coverage (and therefore, customer service quality), Amazon is not the best possible choice as well. As you can read it in Amazon shipping restrictions, not all the products are shown on Amazon can be shipped to any destination on the globe. It is recommended to use AmazonGlobal to find the products with more favorable shipping terms, but, it’s mentioned that even these items can only be shipped to ‘over 100 countries’.
Given that there are 195 countries in the world, Amazon deprives you of the opportunity to reach at least one third of geographic regions on the globe. This is sad – the exploration of these developing markets is considered to be one of the most promising strategies to grow your dropshipping business in 2021.
Even if you’re not really interested in serving these particular markets and prefer targeting more ‘common’ regions instead, there’s still an unpleasant feature of AmazonGlobal. That might cause some difficulties: available product lines, shipping rates and fees will be different for every particular delivery address. Surely, it is not convenient at all.
And I’m not even mentioning that only 30 million+ products are available on AmazonGlobal. Just compare it to AliExpress’s 100+ million items!
Another Amazon limitation is the lack of branding possibility. On AliExpress, you can negotiate with the sellers and ask them to include your pre-paid promo materials in the package. Surely, it will cost you a bit extra, but sometimes it’s totally worth it. On Amazon, it will be really difficult to do the same, especially if your supplier uses the Fulfillment by Amazon service and doesn’t personally take part in the packaging process.
As we have figured it out above, the entrepreneurs who use Amazon as a sales channel are only allowed to specify their own names on the packages. There must be no indication of other persons or companies having participated in the pre-delivery processes.
You might remember the same ‘loophope’ we have already discussed, and try marking your order as a gift. You might think it’s a good idea to ‘hack the system’ and use this opportunity to create your own branded package, but this is not how it works.
Amazon provides its own gift wraps, bags and boxes ‘appropriate for the item’, so arranging a custom design is not possible. Plus, on checkout, you might find out that this particular item ‘can’t be wrapped because of its unusual size, weight or shape’, and therefore, it will arrive in its original packaging, or in a textile bag.
What’s the outcome?
While using Amazon as a supplying platform for your dropshipping business, you’ll face a number of restrictions. They put some limits on your product range, geographic scope of the business, and the branding possibilities.
Dropshipping vs Amazon FBA
While researching the ways to build your online business around Amazon offerings, you’ve probably heard about Amazon FBA. What’s that and is there a way for you to you use it as a profitable alternative to dropshipping?
FBA, or Fulfillment by Amazon, means that you delegate products’ storing, packaging, and shipping to Amazon employees. What’s more, they even get in touch with the buyers after the package is delivered! They provide post-purchase customer service if requested, and arrange returns and refunds whenever necessary.
So, it would seem it’s a highly convenient model for an entrepreneur…but there’s a little catch.
If you want Amazon team to take care of your products’ management, you need to ship these items to the company’s fulfilling center first. There, the company will stock and sort these products, assemble them into packages, and carry out the shipping process.
Of course, that means that if you’re running or planning to start an online store without inventory, you won’t be able to use the Amazon FBA offering.
And what if you’re reselling products after having purchased them in advance? In this case, there are still some aspects you need to take into careful consideration before signing up for Amazon FBA:
- There are fees you need to pay
Amazon will charge you storage fees and fulfillment fees. They differ from category to category depending on the products’ average size, but whatever type of items you sell, you’ll need to pay for every product unit in any case.
- You don’t get the profits immediately
Amazon calculates your amounts of sales, deducts the fees, and sends your profits to your bank account only once in two weeks. So, you’ll need to wait for half a month to actually receive your earnings.
- Amazon stays in control
While it’s obviously great to have someone dealing with product issues on your behalf, remember that Amazon can regulate your business activity if you’re using its fulfillment centers. For example, due to the COVID-19 outbreak, FBA has been partially suspended. Amazon explained it would prioritize shipment of medical supplies, homeware, and essential products that are demanded by self-isolated shoppers al around the globe. Of course, ethically speaking, this was an absolutely right measure – but unfortunately, it has negatively influenced thousands of sellers who had a different product range.
For these reasons, an ecommerce entrepreneur looking for 100% business independence would choose dropshipping over Amazon FBA.
Non-obvious ways to benefit from Amazon dropshipping
So, strictly speaking, Amazon is not a suitable place to run or facilitate your dropshipping business. Still, you can make a good use of the platform, and indirectly benefit from its activity.
Here’s how you can boost your dropshipping business with the help of Amazon:
- Set the best pricing strategy
As we have already demonstrated it before, prices on Amazon products are quite high. Still, lots of buyers are nevertheless ready to make a purchase. Therefore, if you’re importing AliExpress products to your store, you have a great opportunity to research the average price level for the same products featured on Amazon. This way, you’ll get an idea what’s the price that people are ready to pay for such items, and it will let you determine the most beneficial price markup for your store offers.
- Discover best-selling items
Amazon is a great place to find out what’s hot and trendy these days: here is how you can scan the platform for the most frequently bought items. Knowing what’s popular on Amazon, you can find suppliers with the same or similar products on AliExpress. They will be a wonderful addition to your store offer!
- Find extra pictures
Perfect product pages are the key to luring your store visitors into purchasing products. It might be challenging to find enough material for pictures gallery. In this case, you can go on Amazon and look for identical products. Chances are, you’ll be able to get a couple of great product pictures you haven’t seen on AliExpress. In case they have some odd watermarks or Amazon logos, you can safely use our Image Editor to effortlessly remove the unnecessary details.
As you can see, even though Amazon dropshipping doesn’t stand a chance against the good old AliExpress dropshipping, there are ways to indirectly use the platform for your benefit. Treat Amazon wisely, and make the most of this platform’s potential to seriously improve your business performance!