The term “dropshipping” gained popularity in 2006 when AliExpress became popular in the United States with the launch of Chinese eCommerce stores. Dropshipping allows you to start a new e-commerce business without having to invest thousands of inventory in advance.
You are free to test market demand, and if the product does not perform well, you can change the product selection without worrying about inventory backlog. Of course, you can also keep up with retail trends without worrying about slow-moving inventory once demand cools.
What is dropshipping?
Dropshipping is a way to sell products online without keeping inventory. As a retailer, you don’t have to keep a large inventory of products, or even you can use zero inventory.
With dropshipping, there is no need for you to worry about the following things:
- Manage warehouses and pay warehouse fees;
- Pack and ship order items;
- Track inventory due to billing issues;
- Handling returns and goods that have arrived;
- Keep ordering products and improve storage conditions;
- Shortage of funds.
How to start a dropshipping business?
There are two main ways to run a dropshipping business, you can do your dropshipping business on your own website, also you can use platforms like Amazon, eBay, and others to do the dropshipping business.
1. Dropshipping on your own eCommerce store
If you’re using a dropshipping model, you’ll be listing your products on your website without holding any physical inventory. When you get an order, you’ll inform your dropshipping supplier, who will then take care of fulfillment on your behalf.
2. Amazon dropshipping
Dropshipping on Amazon is generally acceptable as long as you comply with Amazon’s requirements. Amazon explicitly states in their drop shipping policy that purchasing products from an online retailer and having that retailer ship directly to customers is not allowed. What you can do, however, is purchase items from retailer A, and have fulfillment center B ship out the orders on your behalf.
Dropshipping on Amazon with FBA
You can use FBA to dropshipping on Amazon. In this way, you can send orders to your customers without having to deal with picking, packing, or shipping them yourself.
With FBA, Amazon will pick, pack and ship your orders for you. They will also provide tracking information to the customer and take care of any related customer service, including returns. Correspondingly, you have to pay for them. You can check the FBA fees to know what you have to pay to FBA.
Pros and Cons of Dropshipping on Amazon
Some sellers like to dropship on their own website, some sellers like to dropship on Amazon, eBay, and other platforms. Today, let’s look at the pros and cons of dropshipping on Amazon.
- Amazon is a platform with huge traffic, there are over 310 million active users. It simplifies your work, you are close to customers, and you can drive traffics by SEO and Amazon ads.
- FBA can help fulfill orders, which is more convenient and the logistics timeliness can be guaranteed!
- You have to pay for FBA fees.
- There are some restrictions on Amazon, you have to follow their policy. It difficult for sellers who want to play by the rules to create a profitable dropshipping business on the marketplace
- It is difficult to establish long-term customer relationships. Customers who buy your products are Amazon customers, not yours.
- Amazon customers have high expectations. If you experience issues with orders, this can result in negative feedback or worse, an account suspension or closure.
How to choose Amazon dropshipping products?
The success of the dropshipping business depends on the right product.
1. Product research
When considering which dropshipping products to sell, it’s never a good idea to choose products based solely on personal preference or intuition.
The world of dropshipping is fierce and changing rapidly. In order to compete with existing sellers, you need to conduct thorough product research and analyze existing sales data. If you want to stand out from the competition, guessing is not enough.
When doing dropshipping business, it is best to focus on the sale of low-priced products, because customers are more likely to buy these products impulsively, which means your sales and profits should be higher.
When buying high-priced products, buyers need more time to make a decision, and more support from you, which means you will spend more time processing customer inquiries, and this information may not Bring sales. Consumers also need to establish trust with retailers before placing an order. They may prefer to go to a physical store and experience it for themselves before buying high-priced products.
Low-priced products bear the lower risk and are a more sensible choice for dropshippers, especially for a new seller.
2. Filter products through reviews
When looking for potential dropshipping products, you can check product reviews.
Quantity of the product reviews. If there are too many reviews for a product, it is not a good choice. We have to know, a product with a small number of reviews means that the product may be in a rising stage of sales. At the same time, a product with too many reviews means there is full of fierce market competition.
In addition, you’d better avoid any product with a rating below three stars. Because it may cause problems in your future sales. At the same time, avoid products with five-star reviews, usually, these reviews may be false.
3. Consider best sellers rank
The sales ranking indicates the popularity of the product on Amazon. Avoid products with too high sales rankings, otherwise, you will face a lot of intense market competition. It is recommended that the search sales rank is within 100,000, but do not choose products that are too high. Remember, the ranking sales of different categories are different.
For example, a product with a ranking of 100 in one category may sell faster than a product with the same ranking in another category, because its popularity is related to the number and ranking of other products in that category.
4. Consider the number of sellers in the category
Another factor you have to consider is how many sellers you will compete with. The electronics and clothing categories have the largest number of sellers, so this category is often the most competitive.
5. Avoid brand-restricted products on Amazon
Brand-restricted products are not necessarily completely banned from selling on Amazon, but sometimes you need to apply to sell on the platform. Although it is not entirely discouraged to do this, it is recommended that you should focus more on products that are easier to start.
6. Don’t compete with the brand
What needs to be avoided is dropshipping products that have already registered the brand, because the brand is allowed to be the only authorized seller on Amazon.
Even if the brand has not yet become the sole authorized seller of Amazon, you still have to compete with their resources, sales history, and popularity. In addition, its consumer loyalty is already very high, and it will be very difficult to intervene and take these customers away from them.
Dropshipping is already very popular. And there are a lot of people who run their dropshipping business on their website, eCommerce platforms, and social media platforms. However, dropshipping is not for everyone. It requires a certain kind of personality and temperament to be successful. Just choose a method that suits you according to your own situation, and then keep it and improve it.