There are many popular strategies to make money reselling on Amazon, and today we’re going to talk about one strategy that we don’t recommend you attempt: drop shipping. Listen today to hear about what drop shipping is, why some Amazon sellers like the idea of it, and the big risks associated with drop shipping.
Drop shipping might sound like a profitable and easy way to make money selling on Amazon, but there are some aspects of drop shipping that cause us to run away from the idea. In fact, we think that drop shipping can cause so much harm for beginner Amazon sellers, that it could ultimately lead to a suspended Amazon seller account. We want your seller account to be protected, so we’ll not only share why drop shipping is not recommended, but will close our episode telling you the safer strategies for building an Amazon business that is set up for longer-lasting success.
Listen on the podcast player below.
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Key points from Episode 167:
- An overview of what drop shipping is.
- Why some Amazon sellers like drop shipping.
- The many risks associated with drop shipping.
- Some of the main benefits of drop shipping.
- The number one reason why we don’t recommend drop shipping as an Amazon seller.
- Amazon guidelines for drop shopping.
- Why it’s super hard to follow Amazon’s drop shipping rules and how breaking them may lead to hurting your Amazon account, seller metrics, and more.
- Why you have no quality control over your inventory with drop shipping.
- Ways drop shipping can go wrong that you have zero control over.
- How you lose out on FBA perks by drop shipping.
- Why drop shipping isn’t for everyone but some might find success.
- The three pillars of a successful Amazon business (and a better strategy).
Links and resources mentioned in this episode:
- Amazon’s Drop Shipping Guidelines
- Understanding the Amazon Buy Box
- How to Win the Amazon Buy Box
- Why We’ll Never Teach You The Fastest Way To Grow Your Amazon FBA Business
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Episode 167 Transcript:
[0:00:01.8] ANNOUNCER: Welcome to The Full-Time FBA Show. In each episode, it’s our goal to help you turn part-time hours into a full-time income, selling almost anything on Amazon. Now, your hosts of the show, Stephen and Rebecca Smotherman.
[0:00:21.8] STEPHEN: Welcome to episode number 167 of the Full-Time FBA show. Today, we’re not going to tell you to do anything. Because we’re actually going to talk about why we don’t suggest drop shipping as an Amazon seller and with me to talk about why we don’t suggest drop shipping is my wife, Rebecca. How are you doing Rebecca?
[0:00:39.6] REBECCA: I’m doing great, glad to be here for this new episode of the show, and glad to jump into this topic soon.
[0:00:45.2] STEPHEN: Yeah, drop shipping is something that some amazon sellers do but we don’t recommend it and we’ll get into that on today’s episode of the Full-Time FBA show.
[0:00:56.1] REBECCA: Before we get started, I wanted to remind you, if you haven’t already, please sign up for the Full-Time FBA newsletter, you can do that at fulltimefba.com. You can go there and subscribe and you will get one or two emails from us a week with blog and podcast and video suggestions for you, fulltimefba.com is where you subscribe.
Now, there are many different ways that people try to make money selling on Amazon. And here at Full-Time FBA, we mostly focus on retail arbitrage, online arbitrage, and wholesale sourcing. So, retail arbitrage or RA is where you go to retail stores, buy inventory that you then resell for a higher price on Amazon, online arbitrage is the same thing, except you’re doing it at online stores instead of going in person to a retail brick-and-mortar store, you buy things online to resell on Amazon, and then, wholesale sourcing is buying items in bulk at a wholesale pricing from a brand or re-distributor that you can then sell on Amazon.
But there are some strategies that we do not promote. We do teach how to do retail arbitrage, online arbitrage and wholesale sourcing here at Full-Time FBA but there are some ways that we just don’t teach. One, in particular, was covered in episode number 96, where we talked about why we don’t do private label.
You can find out more about that at fulltimefba.com/96. Private label, it’s similar to wholesale sourcing but you are buying items that are unique that you then rebrand for yourself or it’s an item that you yourself have created and manufactured that you sell on Amazon.
Now, another strategy that we steer clear of is drop shipping. Drop shipping on Amazon is where you list items for sale as merchant fulfilled, not fulfilled by FBA which is obviously a Full-Time FBA where we spend the majority of our time selling.
Fulfilled by merchant is where a seller listed an inventory and then says that they are going to personally, their business is going to fulfill that order, not have Amazon fulfill and ship that order to the customer. But with drop shipping, you’re listing the items fulfilled by merchant when a customer places an order, you have another online store or brand or wholesale company shipped that item directly to your customer. So, that’s an overview of what drop shipping is and we’re going to get into more details about why we do not promote that type of strategy but just want to just kind of start off level setting so that we all know what we’re talking about here.
[0:03:27.0] STEPHEN: And when it comes to drop shipping, you know, I totally get why a lot of Amazon sellers like the idea of drop shipping. You know, drop shipping, you don’t have to invest in inventory, you just list it on Amazon and if it sells, you go buy it and have that company send it to your customer. So, it doesn’t require as much upfront capital to start a drop shipping business as it would fulfilled by Amazon.
And so, the Amazon customer makes their purchase, then you purchase the item to be shipped to the customer.
[0:03:51.8] REBECCA: Also, with drop shipping, you don’t have to take on the risk that you’re going to purchase inventory that doesn’t sell once you purchased it. So, there is a risk associated with having a business where you sell physical items and you have inventory on hand. And another benefit to drop shipping that many people like is that you don’t have to handle the inventory and store the inventory and pay the storage fees or fulfill the orders yourself.
These are all the reasons why some people would say, drop shipping is a great way to run an FBA business or to run an Amazon business, you can’t really do drop shipping FBA, that’s nothing, it’s the exact opposite.
So, all of that makes drop shipping sound amazing, right?
[0:04:30.5] STEPHEN: That sounds like the best thing ever.
[0:04:33.5] REBECCA: That was so genuine and sincere sounding. Well, there’s big reasons why we don’t recommend that sellers use this strategy and we’re going to get into breaking down why that is now.
[0:04:43.5] STEPHEN: The number one reason we don’t recommend drop shipping as an Amazon seller is it’s very difficult to drop ship and follow Amazon guidelines. Now, some people don’t dropship because they think it’s actually against Amazon’s rules but that’s not the case.
In fact, amazing has specific guidelines on how to dropship on their platform and we’ll put a link of drop shipping guidelines in our show notes for today, fulltimefba.com/167. But Amazon has a lot of different guidelines when it comes to drop shipping and there’s two of them in particular that I just think are almost impossible to follow if you’re going to drop ship.
Amazon says, and I quote, drop shipping or allowing a third party to fulfill orders to customers on your behalf is generally acceptable. If you intend to fulfill orders using a drop shipper, you must always, and this is one of the things that, just really hard to follow. You must always identify yourself as the seller of your products on all packing slips, invoices, external packaging, that means, the box, that means the shipping label, any other information included or provided in connection with the item that you’re selling.
And with drop shipping, I mean, how can you drop ship from somewhere if it’s coming from another company’s business and other company’s boxing, their shipping labels, they got their logos on things. You got the invoices that they include, it’s so hard to make sure you’re following Amazon’s rules.
I mean, Amazon wants the customer to think it’s 100% coming from you and it’s hard to do that if you’re drop shipping. The second thing that Amazon says in their guidelines is to remove any packing slips, invoices, external packaging or other information identifying a third-party drop shipper, prior to shipping the order.
So, you have to have a special arrangement with whoever you’re dropshipping this from, to make sure that you know, any invoices are removed and any logos of a business not other than yours are moved and any packing slips only say you as the seller.
Again, if you’re dropshipping from directly from a manufacturer or a distributor, it’s so hard to follow these rules and guess what? Over time, these rules, if you continue to break them will hurt your Amazon account, hurt your seller metrics, could get your accounts suspended.
And those are just two of Amazon’s guidelines that are seem to be really hard to follow, to be able to be successful with dropshipping on Amazon.
[0:07:01.6] REBECCA: And all of that is not even taking into account, some people who try to drop ship from retail stores. Within Amazon’s guidelines, dropship from a wholesale company but some people try to drop ship from retail stores and that’s impossible to do within these guidelines.
So, the second thing we wanted to talk about is that if you’re drop shipping, you have no quality control over your inventory. And that’s a big problem when you are responsible to Amazon and the customer for that inventory.
If you’re drop shipping, you will never see the items that you’re sending to your Amazon customers so you never have a chance to inspect them or you never have somebody that you are outsourcing to, that you will be able to inspect them. The company that you’re drop shipping from could send the damaged item or the wrong item or an inauthentic item without your knowledge.
But you would be responsible to Amazon and to the customer for those errors. You are the Amazon seller of record and so you are where the book stops on that order. Your selling account would be at risk and if you do OA, online arbitrage, just think of the number of times that you receive online arbitrage orders and you’ve had a mistake with the shipping or you’ve received the wrong item or damaged item, those things happen.
But with drop shipping, you’re not going to be able to catch and correct those mistakes. Those mistakes are still going to happen but they’re going to be directly to the customer with you as the middle man to do that quality control.
[0:08:26.4] STEPHEN: A third reason we don’t suggest drop shipping as an Amazon seller is because you have no quality control over the fulfillment and shipping of your order. You typically have no way to influence the fulfillment and shipping of your drop shipping orders at all with drop shipping.
I mean, you won’t be able to make sure the items are packed correctly before they’re shipped to the customers, you might end up with items that aren’t properly protected from damage during shipment, you might end up breaking other seller guidelines that we talked about before.
Such as making sure that you’re listed as the seller record on packing subs or invoices. That the packing doesn’t have a third-party retailer or a seller contact information. You just can’t catch those mistakes, even if you have an agreement with a wholesale company to make sure that all of these packing slips and logos are removed and you’re the only seller on record, what if they forget, what if they make a mistake, you have no way of making sure that you’re able to correct those mistakes because there’s no quality control over that.
[0:09:19.8] REBECCA: And more quality control issues come into play when you talk about drop shipping and you’re doing a fulfilled by merchant order and you have now control over how or when the tracking information for the order is entered into the Amazon system.
So, as the seller of record, you are responsible for entering the information about your order into Amazon’s system when you fulfill it via fulfilled by merchant. Now, fulfilled by Amazon, they automatically take care of that for you. Amazon automatically takes care of the tracking.
But if you’re drop shipping partner doesn’t enter that information into Amazon system for you correctly, or on time. You are going to be the one who is held responsible for that by Amazon.
[0:10:05.5] STEPHEN: And one big final reason why we don’t recommend drop shipping on Amazon is that drop shipping gives you no control over the stock levels or prices of the item that you’re going to dropship on Amazon. I mean, if you have an item listed on Amazon, via fulfilled by merchant, that you’re going to plan to drop ship, but then, a third-party company goes out-of-stock, you know?
Your customer buys the item, you go to purchase it to send it to your customer and that place is out-of-stock or worse, the place that you’re buying that inventory item to send to your customer, has a higher price now than you first expected that you would be purchasing it from.
So now, you have no ROI or you actually lose money, you have no control over these instances and so, if you end up canceling the order, that’s going to help… if you have to cancel the order, that’s going to negatively impact your Amazon seller account or you might just lose money if you decide not to cancel an order.
So, it’s a big deal to make sure that you can control whether the inventory items in stock and the price levels of it. So, dropshipping is just makes it really confusing and really muddy and so many things could go wrong with trying to dropship on Amazon.
Not only that but since drop shipping is fulfilled with merchant and not FBA. You lose out on all the perks of FBA. I mean, FBA gets more buy box time. FBA almost always gets more buy box time over fulfilled by merchant and so, your seller metrics are ahead by reason that are out of your hands because you’re drop shipping. And your buy box time will be even less.
And so, if you’re curious about learning more about the buy box, fulltimefba.com/buybox and you’ll see how that’s important as an Amazon seller and how drop shipping just doesn’t fit in trying to win more time in the buy box.
[0:11:41.2] REBECCA: So, in all of that, don’t hear us say that dropping on Amazon is a bad idea for all Amazon sellers. That’s not what we’re saying, in fact, some Amazon sellers have perfected the art of drop shipping. But what we are seeing is that even though it sounds easy and almost too good to be true in some cases. Drop shipping is actually a very difficult strategy to implement as an Amazon seller. And there are much easier and more profitable ways to scale a successful Amazon business that can be successful in the long run and help you to have a healthy Amazon account by using practices with your Amazon selling that don’t put your Amazon account at risk for suspension or termination.
[0:12:24.2] STEPHEN: So, when it comes time to actually make a decision on how you’re going to run your Amazon FBA business, again, we come back to the three pillars of a successful Amazon business which are retail arbitrage, online arbitrage and wholesale sourcing. If you want to try drop shipping, more power to you but we just think that there is a better way to get that done.
And so, as we wrap up this episode, we just want to say, to you, Merry Christmas. Christmas is right around the corner and we look forward to next year, 2023, helping you grow your Amazon business with retail arbitrage, online arbitrage, and wholesale sourcing so that your 2023 can be your best Amazon year, ever.
So be sure to subscribe to our blog, fulltimefba.com so you don’t miss out on any of our newsletters and emails and videos and blogpost and coupon codes, and all sorts of good stuff. Fulltimefba.com.
[0:13:18.9] REBECCA: Thank you so much for joining us for this episode of the Full-Time FBA Show, as a reminder, you can find the show notes for this episode at fulltimefba.com/167 because this is episode number 167. At that link, you will also find a transcript for this episode and a list of all the links that were mentioned in this episode.
[0:13:38.6] STEPHEN: And next week on the Full-Time FBA show, we’re going to give you the gift of the shortest but very special episode of the Full-Time FBA show. So come back next week for a quick episode to help grow your Amazon FBA business and we’ll see you next week on the Full-Time FBA Show.
[0:13:58.0] ANNOUNCER: That is all for this episode of The Full-Time FBA Show. So head over to fulltimefba.com/podcast, where you will find the show notes and links from this episode. While you’re there, subscribe to our newsletter where you’ll get several free downloads of our popular and helpful Amazon FBA resources. Now, take action on what you have learned today, so you can find success at turning part-time hours into a full-time income with Amazon FBA.