Low overhead costs and attractive profit margins have made dropshipping a popular business model in the last couple of years. But, while most dropshippers build their e-commerce websites, others choose to do it on Amazon.
You’re probably wondering, “Should I dropship on Amazon?”
Amazon is the most recognized platform in the e-commerce space. Amazon dropshipping lets you leverage both the Amazon brand and customer loyalty to build a profitable dropshipping business quickly.
In this blog post, you’ll learn how you can build a profitable Amazon dropshipping business while adhering to Amazon’s terms of service and avoiding account suspensions.
Strap in!
Dropshipping is an e-commerce business model where the seller outsources handling, shipping, and fulfillment services to a third-party, commonly the supplier. Amazon dropshipping follows the same principles as the classic drop shipping model. The only difference is that you don’t need to set up an e-commerce website, but will be selling on Amazon instead. Some benefits of the Amazon dropshipping model are:
- It has low overhead costs.
- You can leverage Amazon’s reputation.
- You can get your product in front of a vast Amazon customer base.
- It saves you the cost of building an e-commerce website.
- No warehousing or 3PL fees.
How Can I Start Dropshipping on Amazon?
Violating Amazon’s Terms of Service (TOS) is one of the most significant concerns for Amazon sellers. Although Amazon dropshipping as a business model falls within Amazon’s TOS, there are some requirements you must follow to make sure your business complies with Amazon’s guidelines.
Let’s take a look at what you need to get started with Amazon dropshipping:
A Seller Central Account
An Amazon Seller account is mandatory for anyone looking to sell on Amazon. Amazon offers two types of Seller accounts:
- Individual Seller account.
- Professional Seller account.
An Individual Seller account will cost you $0.99 per item sold, while a Professional Seller account will cost you $39.99 monthly. On the surface, an individual Seller account might seem cheaper, but when you start scaling, the per-item charge will accumulate fast and eat into your profits. We recommend signing up for the Professional Seller account to maintain a fixed monthly cost even as you scale your business.
A Winning Product
Product research is critical since your product impacts your business’ success directly. Here’s a checklist that will help you get the right Amazon dropshipping product:
- The product is not on Amazon’s Restricted Products list.
- The product is in an easy-to-approve category.
- There’s an all-year-round demand for the product.
- The product is not popular on Amazon.
- The product solves a particular problem for your target audience.
- The product is catchy and marketable on social media.
- The product isn’t on Prime – you can’t compete against Prime products as an Amazon dropshipper.
Amazon’s Approval In Your Product Category
As we’ve mentioned earlier, you will need Amazon’s approval to sell in product categories like beauty, jewelry, and art. Each product category has specific that you need to meet before you can start selling.
A Reliable Supplier
Your supplier will be handling a large chunk of your business operations, so you want to find a reliable and responsive supplier. In a sea of hundreds of thousands of suppliers, finding the best supplier for your business might feel like looking for a needle in a stack of needles. But, here are some strategies you can apply to make your hunt a little less complex:
- Search on Google to find suppliers and their contact information.
- Use a product research tool to identify potential suppliers.
- Attend trade shows to meet and network with potential suppliers.
How Can I Avoid Getting Suspended When Dropshipping on Amazon?
Dropshipping on Amazon requires you to play by a few rules. Failure to which Amazon could terminate your account. These rules are:
- You must list yourself as the seller of your products.
- Order product samples from your supplier to make sure the product is high-quality.
- Your packing slips and product shipment information should identify you as the seller.
- You should handle all customer returns.
- You should comply with all seller terms and other Amazon dropshipping policies.
- You should NEVER drop ship from another online retailer.
With these rules in mind, here are some tips to help you avoid getting suspended when dropshipping on Amazon:
Ask Your Supplier To Only Fulfill Orders Under Your Name
Shipping your products under a third party’s name is a big no-no in Amazon’s books. Amazon doesn’t want you to confuse shoppers, so all shipped orders should have you as the seller on record. Ensure your supplier understands that they should never include their name or contact information in your orders.
Use An Aged Seller Account To Help You Scale
Amazon isn’t exactly enthusiastic about new sellers scaling their businesses too fast. Rapid scaling can have disastrous repercussions if customers start returning your products. Amazon knows this and tries to protect customers by limiting how fast new sellers can scale their business. But, you can get around this bottleneck by buying an aged Seller Central account with a solid sales record, then registering your business under that account. The good thing is that AIA-Assets can help you get an aged seller account and set up your Amazon dropshipping business for rapid scaling without breaking Amazon’s TOS.
Track Your Order Defect Rate (ODR)
Order Defect Rate (ODR) is one of the metrics Amazon uses to measure a seller’s performance. An ODR above 1% will likely result in an account suspension, so you should ensure it never gets to 1%. While not every customer will give you positive feedback, you should always address the negative reviews asap. You can also ask Amazon to strike a negative review off your record if a customer simply doesn’t like the product itself or if they use vulgar language.
Always Ship Your Products On Time
Late Shipment Rate (LSR) is another performance metric you need to track. If your LSR exceeds 4%, brace yourself for an account suspension. As an Amazon drop shipper, your supplier handles shipping and fulfillment, so you don’t exactly have control over that aspect of the business. But, you need to make sure you work with a very reliable supplier that understands the gravity of shipping orders on time. You also need to sell high-quality products to avoid having too many returns. A high return rate will get you suspended even if your ODR and LSR are above board.
Start Your Amazon Dropshipping Business The Right Way
Amazon dropshipping is an excellent business model, especially for sellers wanting to sell on Amazon without buying the inventory upfront. But, you must comply with Amazon’s TOS if you want to build a successful business. We can help you set up a scalable and compliant Amazon dropshipping by getting you an aged seller account and offering you policy compliance support so you don’t have to worry about getting suspended.
Talk to us now to discover how we can help you launch a profitable Amazon dropshipping business!
