The Truth About Drop Shipping on Amazon
I just got back from spending a wild week in my favorite city… and no, it wasn’t in SE Asia!
I was in New York City, my hometown, for a good friend’s wedding. My buddies are always coming across my YouTube videos and many of them are now thinking about getting into drop shipping. Most of them are cops or teachers and building an eCommerce business in their spare time is a great way for them to make extra money. After all, teachers get the entire summer off and you can only spend so much time at the beach!
Our business conversations are usually pretty “beginner friendly”. We talk about the opportunities, how to select products, how much time needs to be invested, what the chances are for succeeding, and other surface level topics. But this time was different… After a few too many Jack and Cokes the topic of drop shipping on Amazon vs. Shopify came up and we got to go a little deeper into the world of eCommerce…
What I shared that night may not have been so clear (gotta love that whiskey) so I decided to create this guide comparing drop shipping on Amazon to drop shipping on Shopify.
With that being said, I also want to let you know that I am not making this video to try to convince you of anything. I just want to show you my experience with this based on 10 years of running eCommerce businesses.
Three Ways to Drop Ship From Anywhere in the World
Let’s start by taking a step back from drop shipping on Amazon and look at the three different ways you can make money from literally anywhere in the world.
Arbitrage is the first way to drop ship as well as the most common way to drop ship on Amazon. Basically, this model is buying from one place to sell in another.
So in this example, especially working with Amazon, a lot of people try to source products from a company like Walmart. These drop shippers try to find products that are not selling much at Walmart, but are selling more on Amazon! In this scenario, Walmart would become the drop shipper’s supplier.
The second way to make money with drop shipping is also a really hot new trend right now. Drop shipping from China using AliExpress is a good idea as most of the factories are in that country. With this drop shipping model, you are sourcing products from Chinese factories to ship to customers all over the world.
What is tricky about this model is most people use Oberlo, which is pretty much a middleman app. And as you all know, using a middleman is a huge mistake I see new drop shippers make far too often.
The third model to make money drop shipping is selling for suppliers in your home country. With this model you are building a drop shipping business in your home country and selling for suppliers in your home country. For example, I am from the States, my businesses are in the States, and I am selling for suppliers that are in the States. If you are drop shipping from Australia, you would look to drop ship for Australian suppliers, that’s how domestic drop shipping works.
Drop Shipping on Amazon: What Works?
So, in case you were wondering, no you don’t need to use Amazon with all of the above drop shipping methods.There are a lot of different drop shipping strategies and if you feel like adding to our list, go ahead and comment below!
Still, these are the main ways that most people actually run drop shipping businesses use as a fulfillment method.
Drop Shipping on Amazon with the Arbitrage Model
Let’s tackle the Arbitrage model first using the same Walmart scenario from above.
Now, here is the thing – can this work? The answer is, yes.
The problem is that first of all it’s not really a business because you are constantly trying to find products at Walmart that you could sell for more on Amazon. One of the biggest problems here is you have to make sure that these products are always in stock.
When your orders are coming in on Amazon and you have to fulfill them, you are not working with the supplier who is telling you how much inventory they have. You are literally going to another website, buying these items and then shipping it to the customer that bought from you on Amazon. Not to mention, the packaging is going to come from Walmart and that starts to lead to serious customer service issues.
Now I’m sure you can start to see just how problematic the Arbitrage method of drop shipping can be.
Even though I know people are using this method and making some quick money doing so, I have two reasons why I won’t recommend this model. First, is the customer service aspect of drop shipping. You are literally using another website that you have no connection with, other than you are buying stuff from it to fulfill orders. That’s not a good business relationship, which leads to problem #2…
It’s not a business.
Plain and simple, with this model of drop shipping on Amazon you are not building a business. You are building a quick thing trying to flip a product to make a couple of bucks. Maybe you can get $10 if you get a big enough gap between the Walmart price and the Amazon price, maybe. This model could be a hobby or something to experiment with for a short time. Overall, I don’t recommend this method to anyone anywhere for those two reasons.
Drop Shipping with AliExpress
If you are still set on drop shipping on Amazon your next option is to use a website that gives you a bit more freedom like AliExpress. AliExpress allows for more freedom by offering private label products.
With the Arbitrage model, you are kind of saying,”Oh, here’s this branded product. Like, here’s this Sharpie marker, right?” Whereas with AliExpress, you could say here’s this product. It could be private label, right, it would have no label on it. So, for example, you could say here’s “Anton’s Famous Orange Marker”. Right? Which leaves you with a little bit more control over the product.
Usually, the inventory is a bit better too. That is a direct result of actually having that business relationship with your supplier, albeit they’re on the other side of the world.
Yet, using AliExpress to drop shipping isn’t without its flaws. If you want to drop ship on Amazon, you are going to run into the issue of long lead times. Even the fastest ePackage shippers on AliExpress, and we’ve tested all of them just to see, take weeks to deliver the item to your customer.
If you are any bit familiar with Amazon, you know how that stacks up against their shipping speeds. Most of the world is used to Amazon delivering packages in two or three days, not two to three weeks.
And guess what? On top of that, you are almost guaranteed to get negative reviews and returns will be a bigger headache than your customers even imagined. If your customer returns the product, it’s not going back to China. Amazon’s very lenient return policy, means all these AliExpress products come back to YOU. Because of this, I do not recommend this model if you want to drop ship on Amazon.
The way AliExpress Drop Shippers usually make money is they are actually selling on their own Shopify stores. The reason they do that is because on Shopify you can get away with a less than perfect customer service experience.
If your customers on Amazon aren’t happy, they tell the world and you could get banned from the site.
If you are Drop Shipping for your own store, maybe you can get away with not having the best customer service. And that’s the category a lot of these AliExpress Drop Shippers fit into.
How to Use Amazon to Drop Ship Domestically
The third model to drop ship on Amazon is how you can actually build a real business with drop shipping. The best example I can give you would be if I sold a simple flip chart, like the one I use in this video, in my drop shipping business. If I had a good business relationship with the suppliers, I could ask, “What’s my cost, what’s my wholesale cost, what’s my MAP cost, and what’s the MSRP?”
Then I sell the flip charts and the company fulfills the order, we’re all familiar with that process! This model is one that works well to drop ship on Amazon.
Now, I am not saying it just because it’s what we do. We use this model because it’s what works. Think of it this way, basically you are selling these products that are on Amazon, and your supplier is in your home country. When an order is placed, you tell your supplier to ship them out, and a few days later your Amazon customer gets their product.
After that, they are either happy with your product or they are not. Either way, if it gets returned, the product goes right back to your supplier. Now you can start to see the benefits with a model like that.
Finding Suppliers to Drop Ship on Amazon
I have been in the drop shipping industry for ten years now and I have learned a lot of things along the way. One of the biggest being that a lot of these suppliers and brands, about 70-80% of them, will tell you that you cannot sell their products on Amazon.
This is mostly due to the part of what makes a good supplier, well, a good supplier. The reason many drop ship suppliers don’t want you to sell on Amazon is because there isn’t much of a benefit for them for you to sell there. The last thing these suppliers want is 20 different companies like us having a price war on Amazon or eBay.
So if you’re reading this, you are probably thinking, “Thanks Anton, I just read a huge blog post only to find out I can’t drop ship on Amazon??”
Well, that’s pretty much true. However, you can get suppliers who don’t mind if you sell on Amazon, well then yeah, it’s definitely worth it to try listing their products on Amazon.
If You’re Still Set on Drop Shipping on Amazon, Think About This:
If your suppliers tell you not to sell their products on Amazon (or eBay) here is what I recommend you do: get approved with the individual suppliers in your niche, then sell their products as their brands, making you the retailer.
Think about it, when you go to a Walmart or a Target, they don’t sell their own products, they sell products for different brands. In your case, you would have five different brands, and build a Shopify store with all of them listed on your website. Then, you are going to drive traffic to your website through Google, all the normal steps.
I think the main reason why so many people like the idea of drop shipping on Amazon is because there are so many people shopping there every day. Well, guess what? Google Shopping and Google Product Listing Ads have even more people on there, searching around for products to buy.
I hope you found this explanation very helpful. If you were all excited about Drop Shipping on Amazon and I just burst your bubble, I am sorry. But this is the truth, whether you like it or not.
I am telling you after 10 years in this business, this is how we have consistently been able to Drop Ship profitably. It’s not Drop Shipping on Amazon. It’s not Drop Shipping on eBay. It’s not Drop Shipping from China. It’s not doing the arbitrage model.
It’s working with legitimate brands, developing real business relationships, building a real business, and using Google as the primary driver of the sales.
So hopefully you got value. If you did, please leave a comment below. If you have any questions, do the same. I’m more than happy to get down there and help you out.