Drop shipping can be a viable option when selling products through Amazon. However, this business model is not ideal for everyone. Before you dive in and get started, it is worth learning a little bit more about the advantages and disadvantages of drop shipping as it relates to Amazon.
The Benefits
When it comes to name recognition, it doesn’t get much better than Amazon. In fact, if you ask just about anyone in the world about online shopping, they probably already know about Amazon. As a seller, that is good news for you. Working with a giant, well-established company like Amazon means that there is a steady stream of customers. Additionally, you don’t have to worry about driving traffic to your products through advertising, search engine optimization, or other marketing methods.
Using drop shipping to fulfill your orders also provides a lot of benefits, the largest of which is that you don’t have to worry about carrying inventory. The only time you pay for products is after an order comes in. That means that your only expenses are the fees that are charged by Amazon for posting a listing.
Working with the drop shipping company also allows you to offer an incredible array of products. Unlike traditional retailers, you don’t have to worry about maintaining inventory. That gives you a lot more freedom to expand your product offerings.
The Drawbacks
When purchasing products from a drop shipper, the profit margins are often extremely thin. You may have a hard time competing against larger retailers since they usually get major discounts on their inventory by purchasing in bulk. This is especially true with items that cost a lot of money such as electronics. Keep in mind, however, that you may be able to increase your profit margins by focusing on less expensive products instead.
Another downside to drop shipping is that you may not always know when products are out of stock. If someone purchases an item from your listing and the drop shipper doesn’t have it in stock, it reflects poorly on you as a seller. It is important to regularly check with your supplier to make sure that they have an adequate inventory available for all of your product listings. Ask them to notify you when the inventory drops below a certain point so that you can make any necessary changes to your listings. If you continually sell products that are out of stock, your seller account could get shut down.
One of the biggest advantages of drop shipping is that it allows smaller merchants to compete with much larger companies without needing to purchase a lot of inventory. Amazon rewards sellers who offer affordable prices and who have large sales volumes. To that end, drop shipping can be a good way to establish yourself as a reliable seller.
If you really want to stay competitive, you should consider using a repricing tool like RepricerExpress to automatically adjust your prices on Amazon. You ideally need to know about tax in this regard too – here is a good guide to ecommerce VAT.
This will help ensure that your products get as much exposure as possible. Most of these tools offer free trials. Consider signing up for one of these trials to see whether or not it positively impacts your sales.