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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!

My beautiful wife Thao, and I, enjoying the summer weather in New York City!

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

Retail Arbitrage

Retail Arbitrage

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.

AliExpress

Drop Shipping with Aliexpress

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.

Domestic

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.

Problem #1

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…

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 want to drop ship on Amazon, you are going to run into the issue of long lead times.

If you want to drop ship on Amazon, you are going to run into the issue of long lead times.

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

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.

Wrapping Up

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.

Anton Kraly
 

Anton is a the Founder & CEO of Drop Ship Lifestyle – an online coaching program for eCommerce entrepreneurs. He began selling online in 2007 and has built and sold multiple seven-figure businesses while leveraging the power of drop shipping.

Click Here to Leave a Comment Below 27 comments
Anton Kraly

Hey Everyone,

As many of you already know I created Drop Ship Lifestyle after selling a network of eCommerce stores and then trying to find a community of other store owners to network with… What I found was a bunch of scammers who promised newbies they would get rich quick by following their push button systems!

This lead me create a new community along with online training that shares how to build a REAL online business.

I’d love to hear what you think… it’s 10 video training modules designed to help you drop ship profitably… all for free.

Be sure to click here to check it out and send me your feedback 🙂

If you go through the “What Is Drop Shipping?” mini-course and still have questions just contact me and I will help you out.

Reply
Mary

Doing dropshipping on Amazon from another retailer is against Amazon terms of service and you will be suspended or banned. You can only dropship if you are the retailer. Your delivered items cannot show any packing slips from a 3rd party. If you want to do retail arbitrage on Amazon you need to do it by FBA (fulfilled by Amazon) where you send your purchased goods to Amazon fulfillment center.
Dropshipping on Amazon from AlieExpress is not recommended because of shipping delays. When customers complain to Amazon their solution is to suspend your seller account. I am an FBA seller and Amazon’s rules keep changing for the worse and it’s a nightmare considering the tiny profits.

Reply
Tammy

Thanks for this article, Anton. It truly clarifies several points that most courses out there don’t until you have bought them and then realize it’s not as easy (or professional) as they made it sound at first.

Now, here’s a straight forward question for you… considering the high fees of advertising in Google Ads right now, how much marketing capital does one need to truly make this business work, at least at the beginning? I’d like to get a straight answer that says something along the lines of “you need $XXX.XX every week for 3 months until you see profits and then build from there.” I know this is not an exact science but an average would be great.

I have seen/heard of many people that got excited after a webinar and bought the course, only to be left hanging dry because they can’t afford advertising and traffic. Hope to get a frank answer from you.

Thank you!

Reply
    Anton Kraly

    You’re welcome, Tammy!

    Regarding how much money you need to spend to make a profit when drop shipping… it’s impossible to give a fixed amount but to be honest it’s not all that much.

    Assuming you’ve got a site that optimized to convert and assuming you’re getting impressions and clicks from good keywords you should be getting conversions very early on.

    Most of the ads we run (on Adwords) are direct response. This means the customer will decide whether or not they will buy from our store within 1 – 5 days. If we’re getting traffic and no one is buying within that window it means we are doing something wrong and it’s time to troubleshoot (both our Adwords account and our site).

    We do have a checklist that we go through quite regularly if conversions are sub-par. You can find many of these things in the “easy wins” section of the Drop Ship Lifestyle members area.

    Hope that helps!

    Reply
Jack

I want to be an independent retailer, I am currently using Oberlo to list products. Finding a drop shipper in The USA is tough.It’s been a year and I haven’t advertised much. I am concerned about giving me store a bad report due to delay shipments.

Reply
Christal

Hello, Anton! I really enjoyed this article and I think I will give Google Shopping and Google Product Listing Ads a try. I’m not getting sales on eBay. Thank you!

Reply
    Anton Kraly

    Awesome, glad you enjoyed it Christal.

    And I do think you should shift your focus to Google PLAs 🙂 I stopped selling on eBay about 8 years ago and I haven’t looked back.

    Just let me know if you have any questions!

    Reply
      Happiness

      Hi Anton,

      Thank you for clarifying my doubts. I live in the UK and 70% of UK suppliers charge to drop ship. Is this advisable? Can you also tell me more about google PLA?

      Thanks,
      Ppinex

      Reply
        Anton Kraly

        Hi Ppinex,

        I know we have a lot of students who are drop shipping in the UK and as far as I know they are not paying any fees to drop ship. If you’re a member of the Drop Ship Lifestyle I’d highly recommend starting a thread about this on our private forum.

        Thank you!

        Reply
JeffC

Amazon is like shifting deadly sands for many sellers who are not big-time operators.

The best advice I was given about Amazon was that they don’t care about you (unless you are a big seller); they only care about their shareholders and profit.

Amazon has been known to ‘appropriate’ certain top selling products from various suppliers and then make them their own – so that they can make more profit(i.e. monopolize the buy button for the product which is key for conversions and sales) at the expense of other sellers.

Amazon is not to be trusted as a legitimate business partner since they make all the rules (and can change them at will with hardly a moments notice) and you either adhere to them or you can be punted off their platform – for even the most inane reason.

To achieve a decent level of success on Amazon it is often understood you need big bucks and lots of external support.

The best way to go is to get your own web site where you as the owner make the rules you want and do whatever you want. Use Amazon and other platforms only as secondary sales channels to supplement your primary – which is your own web site.

Reply
    Anton Kraly

    Well said, Jeff.

    While there is still a lot of money to be made via FBA it’s a risky game to play as a long term business.

    As you stated, they are concerned with share holder profits and that is all.

    I don’t foresee them overtaking FBA sellers in the immediate future but I wouldn’t be surprised if they do so within the next 5 – 10 years.

    Reply
Petra

Hello,

I am a Thai. I am wondering your beautiful wife is Thai or Vietnamese? 🙂 🙂

Sorry for being nosy!

Reply
Maria Rivera

Always enjoy Antons material! YOu give out so much quality info to us.. I really appreciate it.

Maria.

Reply
Rico Williams

I am a brand new “newbie” and I have just created my store on Shopify and I see so many products out there that people are purchasing.I need more guidance on how to make my products seen and if Alliexpress is the best place to do my drop shipping from?

Reply
NUR AQIDAH AHMAD RADZI

hai. why using a middleman such as oberlo is a huge mistake?

Reply
Jacqui

Hi Anton,
Thanks so much for theses posts and feedback – perfect timing.
There is much being said about selling on Amazon, especially with Amazon due to open in Australia in the near future.
Many Webinars and seminars with training being offered, which all look attractive.
Especially FBA on Amazon, as it seems there is so much free traffic.

I have been following you for a while, and found your article very relevent and timely to my journey.
Thanks so much for the clarity.
Keep up the great work. Thanks a ton.
Jacqui 🙂

Reply
pratima shrivastav

Hi Anton,
Thank you for the wonderful post.
I am considering to start drop shipping. Do I have to get shopify or can i setup my own website using WordPress and Wocommerce? I already have a domain and hosting. Also where can I find a seller?

Reply
Chris

In your opinion, would it be best for beginners to start with marketplaces such as Amazon and eBay or their own shopify site?

Best,

Chris

Reply
Jasmin vora

Hi Anton,

Tks for the wonderful video, very knowledgeable.
I am from India, can I have your mail Id pls.

Regds
Jasmin

Reply

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