Let’s start with the fact that dropshipping on Amazon is prohibited by the platform’s rules. This seems to be the end of the explanation. However, there are many “attractive offers” on the Internet on how to circumvent this ban and start “making money in the American market without investment, having only a phone”. Why should you not resort to this sales model even if you really want to?
What is dropshipping on Amazon?
Dropshipping is a fairly simple and profitable sales scheme that is used all over the world. It cannot be considered a fraud, but in fact, you are selling something you don’t have.
How does it work?
1. You find a supplier and create conditions for sales: an online store, a profile on social media, a page on a trading platform.
2. The buyer places an order through your store/profile/page.
3. You process the order (discuss the details and wishes of the customer), and then pass this data to your supplier.
4. The supplier sends the parcel to your customer.
Thus, you, as a seller, are not involved in logistics. Your task is marketing, i.e. looking for customers who are ready to buy. You don’t need to rent a warehouse to store stock, spend money on packaging and branding. This is what makes dropshipping on Amazon so attractive – you can launch a working business without any investments.
Why shouldn’t you do it?
It would seem that you’ve found it – the perfect sales scheme that requires minimal costs and no headaches. But there are a number of reasons why you won’t be able to build a stable and promising business using the dropshipping model.
1. You do not control the quality of “your” goods. Most often, sellers have not seen what they offer to the buyer. That is, you have no certainty that the product meets the declared characteristics. You have to rely only on photos and manufacturer’s promises. At the same time, the risks of losing your reputation fall on you, not the supplier. And your store also receives negative reviews.
2. It’s hard to build relationships with customers. Selling is easy only when people are confident in their choice. But what if the buyer starts asking additional questions? Or asks to see real, unretouched photos/videos? You won’t be able to meet their needs and provide such information.
Amazon’s attitude towards buyers and sellers is like a favourite and unloved child. For the former, they are ready to do anything, while the latter constantly need to prove that they are worthy.
So, when starting a business on the platform, remember: THE BUYER IS ALWAYS RIGHT. And it is in your best interest to do everything possible to make them satisfied with the cooperation.
3. You have no influence on the speed and quality of delivery. You have no guarantees that the supplier will send the goods on time, that the packaging will be intact, that the buyer will receive exactly what he or she wanted, and not a counterfeit or defective product. There is also a mandatory requirement from Amazon – you must enter the tracking number of the parcel after it is sent. The supplier may forget to provide it or send incorrect data. Particular difficulties arise when the buyer requests a return and the supplier does not agree to do so.
4. You are not in control of your business. At any time, the supplier can raise prices. And then you will either have to buy back the product at a higher price, depriving yourself of profit, or make a cash refund to the buyer, depriving yourself of your Amazon rating.
Also, your manufacturer may announce that the product you already have a queue of orders for is no longer being produced. In general, there are dozens of other situations that you have no control over, but which have an extremely negative impact on your reputation, ranking, and finances.
It is likely that you will spend a lot of effort to create a positive image of your Amazon store, invest in SEO promotion and purchase advertising. And just one bad shipment from a supplier and a dozen negative reviews from customers will ruin your entire business.
To sum up: A dropshipping business requires constant personal control and is very difficult to scale. With this approach, you won’t be able to ensure customer loyalty and return. This is a short-term model.
So how do you build a business on Amazon?
The Internet promises that if you find a good, reliable manufacturer, you will eliminate all the risks associated with dropshipping to Amazon. Ukraine, for example, is very rich in local brands that you can cooperate with.
However, we do not recommend testing this hypothesis and putting your business at risk from the start. It will be much more promising to start with the Private Label model. You can read more about it in our blog.