Amazon Dropshipping Policy Explained with Pros and Cons

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Amazon Dropshipping allows you to sell products online without the need to store or purchase inventory.

This idea of business has attracted many dreamy entrepreneurs who are looking to start their own ventures.

This article will explain how this model works and what you need to do to get the most out of it.

What is Amazon Shipping?

As the name suggests, Amazon dropshipping is a business model where you list products on Amazon and sell them, without actually owning the inventory or delivering the items to customers.

You can run a business on Amazon and not have to buy stock or make upfront investments.

A third-party merchant (usually a wholesaler) will instead procure the product and maintain the inventory. Then, it will be shipped to the buyers promptly.

Your primary job is to act as an intermediary on Amazon, driving traffic to your products, and forwarding orders to your supplier. To accomplish this, you can have an automated system.

You must also communicate frequently with your supplier to ensure that orders are delivered on-time and that everything runs smoothly.

Everything you make on every sale is taken away, less the cost of goods and possibly shipping and handling fees. This money goes to the manufacturer/third-party.

This is all there is to it. It sounds simple, but it’s quite exciting.

Dropshipping on Amazon is becoming more popular. Amazon.com received more than 2 million visits to its marketplace in March 2019. Imagine tapping into this market and making big money without spending a lot. It sounds lucrative, right?

Dropshipping is just like any other business. There are ups and downs. You should consider these things if you’re serious about this route.

Tim discusses some of the shipping issues sellers face when shipping.

How do I drop a ship on Amazon?

Choose the right products

First things first, you need to find the top, money-making products on Amazon. You don’t want to have a product that doesn’t make any sales. It is important that your products are selling well, generating large orders each day, and making a substantial amount of revenue. This is a win-win for both you and your supplier.
Ideal product history trends should look something like this:

This product averaged 60 to 70 orders per day and generated an average of $2,600 in daily sales. These are the figures you need to target if you want to find your ideal product.

Locate a Supplier

Finding a supplier is the second step in your Amazon dropship plan. We mean a genuine, honest wholesaler who isn’t just out to make a quick buck.

Many wholesalers will charge a monthly fee, or require a minimum order to do business. Dropshipping is all about reducing costs and maximizing profits.

Hence, to find the best wholesale suppliers, here is what you can do:

  • You can start with a simple Google search. To find a supplier that specializes in your product/niche, you might need to do some research. It is a good idea to compile a list of 10-15 suppliers. Contact each one to obtain quotations and to learn their terms and conditions.
  • Attend trade shows – this is one of the best methods to locate wholesale suppliers. Each year thousands of trade shows take place around the globe, attracting suppliers and manufacturers from all industries. It’s a great way to meet industry professionals and wholesalers and make good connections. Although attending trade shows is expensive, it’s worth it if you have the funds.
  • Invest in a Supplier Directory. A supplier directory is a complete database of distributors and suppliers, organized by niche/markets. Directories will be available for every niche, regardless of whether your product is in the automotive or hardware sectors. These directories will give you all the information that you need, if you have access to them.
  • Get in touch with the manufacturer directly. This is a great way to locate genuine suppliers for your product. You simply need to reach out to the manufacturer to request a list from their wholesale distributors. Contact these distributors to find out if they dropship and how you can set up an account.
  • This is a major advantage because you won’t have to spend too much time searching for suppliers.

You need to carefully screen suppliers if you want to stay in business for a long time. You should communicate your goals and ideas to get a clear idea of their ability to process orders. To avoid future problems, it is important to discuss pricing and other money-related issues in advance. You must ensure that your suppliers and you are on the same terms before you enter into a business partnership.

Create Your Amazon Seller Central account

Once you have sorted through the suppliers and products, the next step will be to set up Amazon Seller Central and get the show started. This is an easy process that requires only a few steps. More information on the same can be found here. Also, it is recommended that you opt for the Professional plan rather than an individual plan as you will most likely sell more than 40 units every month.

Do your Keyword Research

Time and again, the importance of Amazon keyword research has been emphasized, all for the right reasons. It will be difficult to make your products visible on the market if you don’t speak the language of shoppers and understand the types of queries they use when searching for products online.

Your first step after you have registered as an Amazon seller is to collect all relevant keywords. This collection should include both your most popular queries with high search volume, and the highly sought-after long-tail keywords like those shown here.

In addition to this, you should also target your top competitors through the reverse ASIN feature and identify the keywords they are using in their listings. Have a look at these:

You can search for that ASIN by looking at the long-tail and product keywords. Also, look out for important trends such as CPC rate and search volume.

Now you have a list of powerful keywords and are ready to create a compelling listing to sell your product. Now, let’s move on to the next step.

Prepare your product listing

When customers visit your Amazon page, the first thing they will see is your product listing. Based on what you have provided, they will decide whether or not to buy. It must be innovative, creative, engaging, and, most importantly, contain all the key words for your product.

It must answer the question of the reader, “Why should I purchase your product?” While making sure it is easily searchable by Amazon’s Search Engines. Dropshipping is a business that relies on people buying your product.

It is a difficult task to create a compelling product listing. There are so many sections to discuss here, we believe it is better if you visit our comprehensive guide on how to write a listing that sells.

Launch your Product

You are nearly there, Woohoo! Your final step is to publish your product on Amazon. This can be done by creating a strategy that emphasizes social media promotion, giveaways and Amazon Sponsored Product campaigns.

You have just launched your product. Now you must make it searchable on Amazon. Start with PPC campaigns and then go about promoting your products on Facebook, Instagram, Twitter, et cetera. Your product must be talked about in the marketplace. Offer discounts or giveaways to attract early traffic to your listings. Your product’s position in search results will rise if it has a better sales record on Amazon.

You should also be focusing on reviews of your products while you’re at it. The rule of thumb is to not ask for or buy positive reviews. Amazon’s terms of service must be followed and reviews should only be received naturally. For more information on the same, you can visit this comprehensive article regarding how to get Amazon reviews.

Monitoring the performance of your business proactively

Dropshipping is a business that requires you to be responsible for two things.

  • Ensure that your supplier has everything in order (inventory and logistics, etc.
  • Get traffic to your product page on Amazon and get orders

The last step in your journey is to ensure that your business runs smoothly. You need to frequently track your listing’s position in the search results, monitor and optimize your ad campaigns, and more importantly, work towards taking your listing to the top of page one. You must also keep in touch with your supplier to ensure that your orders are delivered on time.

Amazon’s Drop Shipping Policy

Amazon will accept the model that allows a third party to fulfil your orders for you. However, before this happens, there are certain conditions:

  • You must be listed as the seller of your products
  • All invoices and packaging slips must clearly identify you as the seller.
  • You are responsible for processing and accepting returns and refunds
  • Any information identifying your supplier as the third party fulfilling your order must be removed
  • It is not possible to purchase products online and have the merchant ship directly to you
  • Last but not least, you must follow the Amazon selling policies and your Seller Agreement

For more information on the same, you can view Amazon’s Drop Shipping Policy here.

Amazon Drop Shipping: Advantages and Drawbacks

Dropshipping can be an interesting option, but before you dive in deeper, here are some pros and cons.

Advantages

  • It’s very simple. Drop shipping on Amazon is quite simple, as you should have realized. Finding the right supplier and product is half of the work. You can focus all your efforts on marketing and listing your products on Amazon without worrying about shipping logistics.
  • You need to invest very little. You don’t have to pay for shipping or inventory, so the amount you invest in your business will be almost nothing. You only need to pay Amazon selling fees. This is far less than buying the product in advance. You also have more freedom to use PPC marketing in a more aggressive way.

    For better visibility and performance, you can invest more money in the ads. This will work if you understand what you are doing. Otherwise, it could prove costly.
  • It’s easy to get into markets! Drop shipping offers one of the greatest advantages. Drop shipping is easy because all you need is the right product, and a reliable supplier. You can explore many niches and categories. You don’t have to be afraid of entering new markets or establishing yourself as an industry leader.

    You only need to have solid marketing skills and a reliable supplier. Drop shipping on Amazon is a great option if you feel you’re good at it.

Advantages

  • Your profit margins might not be as high. Let’s face the facts – your margins after paying your supplier all product costs may not be sufficient. To overcome this disadvantage, you should look for products with excellent margins.
  • You cannot control inventory. As we mentioned, having no inventory is good as it frees you from the headache of investing. But, if inventory is out of your control, it can be quite detrimental to your business.
    It is because inventory level is an important metric in Amazon SEO. Amazon will replace your listing on search results pages with listings from your competitors if your product is out of stock. To regain your position, you’ll need to start over.

You must always be aware of the inventory held by your supplier so you can adjust your strategies and listings accordingly. Communication is key to dropshipping success, as we have said before.

  • Shipping cannot be guaranteed. Drop shipping will leave you with no control over shipping. Your supplier’s ability and willingness to fulfill orders on time is key. It’s great if he does it. Your business will be affected if he fails to do so. You must find reliable partners to do business with.

Last Thoughts

Drop shipping on Amazon is worth it if your supplier is reliable and trustworthy. On your end, you need to take care of running the show on Amazon – listing creation, marketing, gathering reviews, and improving your product’s visibility. If you feel that you are quite knowledgeable in these aspects but don’t have the necessary money to invest in buying inventory, then dropshipping is the answer for you.

You can share your experiences with us if you’ve already tried it. Good luck!

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