What is Drop shipping?
Drop shipping refers to when a seller constructs an online retail store, or through the means of a selling platform, such as Amazon, for the purpose of taking product orders. They, however, do not directly participate in the acquisition, storage, or shipment of the products. In lieu of that, the seller will deploy these responsibilities to an external party.
How does Amazon Drop shipping Work?
1. New prospective sellers will firstly have to source a legitimate supplier or wholesaler who will supply products in accordance with Amazon’s Drop shipping Policy.
2. An individual will set up their Amazon Seller account and adds product listings. When a customer purchases the drop ship product, the seller will send the order to the supplier.
3. The seller has the responsibility for letting the customer know that their order is being processed, as well as to address any issues concerning customers and process returns.
4. Once the supplier obtains the buyer’s information, the supplier will then send the product to the customer.
Advantages of Drop shipping
Amazon allows drop shipping if a seller follows the guidelines set out for them to observe.
Drop shipping is an ideal type of order fulfilment method for those businesses who do not have the adequate financial means or storage capacity to handle inventory, since there are only small-scale overheads incurred.
In addition to this, there are low start-up costs, as a seller only needs to give a portion of the proceeds of the sale to purchase the product from your supplier.
The process is also relatively fast, as you do not have to utilise your own inventory. This is because you do not have to wait for your products to be manufactured and/or shipped to the fulfilment location.
Disadvantages of Drop shipping
As products are shipped directly from the supplier to the buyer, a seller has no control over the quality of which the product is delivered with. They are therefore liable for any damaged products, as they are not able to benchmark the quality to their standards after shipment.
Delivery times on dropship items are also often slow. This is due to nature of suppliers tending to be located overseas. Subsequently, shipping times for products shipped from overseas supplies can take weeks or even months to be delivered to customers. This can result in negative traction for the business.
As there are low barriers to entry with this type of fulfilment method, it allows room for a lot of competition. Alongside the fact that other Amazon sellers are able to sell identical products, price is key to winning over customers and setting your business apart.
Top tips:
1. Promoting your listings. A seller will need to drive traffic to their page. This can be done through several ways, such as using Amazon Pay-Per-Click (PPC).
2. Focus on your customers. A seller can allocate more of their time to customer service as they no longer have to manufacture or ship their products. Focussing on customer satisfaction can help in gaining good product reviews.
3. Get samples of products. By ordering a unit in advance, a seller can inspect the products, time how long they took to be delivered, and whether the products came as described.
4. Don’t solely focus on competing with price. Focus on other aspects such as service, promotions, free shipping, etc.
5. Focus on niche products. Other businesses will be less able to sell identical products.