Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly.


how is dropshipping different from normal delivery?

The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.

To put it bluntly: it is just like selling in black. For example, buying a ticket from a theatre and selling it for less than the standard price.

But in dropshipping the price is not lesser, it may even be a little pricy than the original or the same amount.

 

Is dropshipping illegal?  

Yes, dropshipping is legal. You may run into other legal issues depending on who your supplier is (as we discussed above), but dropshipping on its own is a perfectly legitimate method of order fulfillment. Just remember to protect yourself with a Dropshipping Agreement Contract.

 

Is dropshipping allowed on Amazon?

Yes, Amazon lets you dropship on the marketplace as long as you follow a few housekeeping rules: Always be the seller of record for products. Identify yourself as the seller on packing slips, invoices, and other information in connection with products.

 

How does dropshipping on Amazon work? 

Dropshipping is an e-commerce method in which the seller takes orders on behalf of a manufacturer, distributor, or supplier. Then, when a customer buys the product, the seller uses their supplier to fulfill those sales.

Often, drop shippers reposition the sold goods as their own and the end consumer is never made aware that the goods came directly from the manufacturer. This practice is popular on e-commerce sites like Amazon, eBay, and Shopify.

And while this may sound somewhat complex, we’ve broken it down for you to help you get a better handle of how it works and how you can start dropshipping in 2021.

Here is a diagram that teaches you the basics of dropshipping on Amazon (explained in further detail below):


1.   First, an Amazon customer (on the left-hand side of the diagram) purchases the product you’ve listed on Amazon. 

2.   Second, once the transaction is finalized and you receive the funds, you purchase the product directly from the supplier (on the right-hand side of the diagram) and give them the customer’s information. 

3.   Lastly, with the buyer’s information in hand, the supplier then sends the product to the customer.

What disadvantages are there to dropshipping on Amazon?

Naturally, as good as dropshipping sounds in terms of its advantages, it does have a few disadvantages to consider.

Competition

Because the barriers-of-entry are so low with dropshipping, competition can be high. In addition, while there is some possibility of differentiation with the products you are selling, there is nothing stopping other Amazon sellers from selling identical products.

As such, price is one of the few levers you have to pull to set yourself apart from others, which can lead to a “race to the bottom.”

Slow delivery times

Often, goods that are drop shipped on Amazon are shipped from the suppliers and manufacturers. And often, those suppliers are overseas.

For that reason, shipping times from overseas suppliers can take up to a few weeks (or sometimes even months!) to reach the end-user. 

Lack of quality control

Because items are shipped directly from the manufacturer to the buyer, there is no way for you to control the quality of the product.

When you consider that products may travel 10,000 miles or more to reach their final destination, it’s easy to see how they could get damaged in the process.

How to start dropshipping on Amazon

Now that you understand a little more about dropshipping on Amazon and how it works, here’s how you can get set up as a drop shipper.

Step 1 – Set up an Amazon seller account



In order to sell on Amazon, you will need an Amazon seller account. You can get one by going to sellercentral.amazon.com. There, Amazon will offer you two choices for the type of account that you can start with: individual and professional. 

Step 2 – Find a high-demand/low-competition product



Next, you will need to find a product to sell on Amazon.

You can do this by using a tool like Jungle Scout’s Opportunity Finder to find high-demand/low-competition product opportunities. And while you may have your own metrics to use for finding such products, I recommend starting with the following criteria:

  • 100-300 unit sales per month
  • Set competition from “very low” to “low”
  • Fix the average monthly price from $20-$35
  • Set niche score to 7+

This should give you an excellent number of product opportunities to peruse in all categories.

Also, when starting out, I recommend keeping things simple. Housewares, sports & outdoors, and patio, home, & garden are all great categories for beginners because they tend to be low maintenance.

Step 3 – Check a site like Aliexpress to see if the product is available


Once you have some product ideas, you will need to find a supplier.

The biggest connection to dropshipping products is Aliexpress. It’s a business-to-business website that puts e-commerce entrepreneurs in touch with suppliers who are looking to dropship their goods.

Just type in the search terms for the product that you are interested in selling and, just like Amazon, a variety of products will come up.

Once you click on one, you’re provided with a number of details. In the above example, you can see that the notebook/agenda planner costs $3.22 with free shipping into the US (and shipping is free).

The seller also offers a 60-Day Buyer Protection of the product. (Be sure to note the delivery time, however, which is more than a month out!)

Step 4 – Create an Amazon listing

After you have a product idea and a supplier to fulfill that product, you’ll need to create an Amazon product listing.

For E-Books, Accessories,   Mobiles,  Fashion,  Housewares, Sports, Toys, Movies.

From your Seller Central account, go to Inventory > Add a product. When the Add a Product screen comes up, click “Create a new product listing.”



First, you will need to choose your product category. Then, once you’ve done that, you’ll have to fill out the information for the listing itself.

When setting a price for your drop shipped product doesn’t forget to account for Amazon’s fees. If you are a professional seller, you will pay a referral fee of 8-15% depending on the category. Individual sellers pay an additional $1.00 per sale, too.

You can learn more about Amazon’s fees by category on their Selling on Amazon fee schedule.

Finally, as soon as you’re ready, you can publish your listing and start making sales.