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The Truth About Amazon Drop Shipping

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There are a lot of different ways to drop ship, but the one I get asked about the most is Amazon drop shipping.

Just this year I was at my friend’s wedding in New York and got to talking with some of my friends about eCommerce. Most of them are teachers or police that have some interest in making a little extra money in their spare time.

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

Usually these conversations are very beginner level. We typically talk about how much time needs to be invested, chances for success, and how to select products. But after a few Jack and Cokes, the topic of drop shipping on Amazon vs. Shopify came up.

That’s when I decided to create this video to give you the truth about Amazon drop shipping.

I cover a bit about different types of drop shipping in the video, but I mostly want to answer the question, “Should I drop ship on Amazon?”

To help answer whether you should use Amazon to drop ship, I’ve put together some of the pros and cons of Amazon drop shipping.

Pros of Amazon Dropshipping

Pro #1: Very Large Audience

A lot of people are very concerned with traffic, and how to get it to their store. After all, traffic is the cornerstone of any eCommerce business.

One of the best parts of Amazon is that it has around 2.5 billion visitors each month that are looking to buy.

Now this doesn’t mean that all that traffic is going to come across your door step… But it does mean there is already a pool of people ready to purchase, which is hard to pass up.

The good news is Google PLAs have even more reach, so if you do what I teach and build your own drop shipping store, you’re going to have a rich pool of people to market to.

Remember, with Google PLAs you’re only targeting those who are likely to buy. Rather than hoping that the right people show up to your dropship Amazon store.

Pro #2: Easy To Set Up + No Hosting

A lot of barriers to starting your own drop shipping business are technical ones. People think they have to be web developer to have a beautiful storefront. With Amazon, you aren’t registering URLS, working with a hosting company, and doing a bunch of backend work on your site.

Instead, you just use their process and list products on their site. It is a lot less daunting to people who believe the myth that you have to know a lot about technology to create something that sells, something professional looking.

Cons of Amazon Dropshipping

Con #1: No Access To Customer Data

If you’re new to eCommerce you may not know that having customer data is crucial to growing your business. With data and emails you can build a meaningful relationship with your audience, which you’ll use to sell new products. It’s called the Lifetime Value (LTV) of a customer.  

With Amazon drop shipping, you aren’t privy to the customer data... leaving you with no way to scale your business. Click To Tweet

With Amazon drop shipping, you aren’t privy to the customer data… leaving you with no way to scale your business.

Con #2: Your Store Could Disappear Overnight

Now Amazon can use that customer data that I previously mentioned to discover what new niches are profitable and then expand their very own line into your niche.

This happens more often than you would think and pretty much shuts down your store overnight. Since Amazon owns every part of the transaction, they can offer a better price than you’ll be able too.

Not to mention they will have their product rank above yours because it’s their site after all.

Con #3: Not A Sellable Asset

One of the most exciting things about building your own store is that you’re building a sellable asset. It’s something that people new to eCommerce overlook. After you find some success, your store has a real value if you ever want to sell it. That’s because buyers are interested in finding drop shipping stores that are already successful.

With Amazon, you don’t have a sellable asset. It’s almost a flea market type structure, where you pay for a booth. You don’t own the flea market, you’re just a vendor in it.

Con #4: Suppliers Won’t Work With You (Especially Local)

With the flea market nature of selling on Amazon, a lot of suppliers won’t want to associate their brand with you. Instead, if they want an Amazon presence, they will just set up their own store. Basically there is very little upside to work with you.

Anton-Amazon-Drop-Ship

Now that you have some pros and cons, I want to talk about how you get products to sell on Amazon.

Amazon Drop Shipping with the Arbitrage Model

Arbitrage is the first way to drop ship as well as the most common way to run a dropship Amazon store. Basically, this model is buying from one place to sell in another.

what-is-retail-arbitrage

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 selling for a low price at Walmart, but are more expensive on Amazon! In this scenario, Walmart would become your supplier.

Now, here is the thing – can this work? The answer is, yes but it’s not really a sustainable business.

Problem #1

One of the biggest problems with using the arbitrage model is having to constantly check if your products are in stock. You also have to continually search for cheap items so that you can actually make a profit.

Problem #2

If you use a supplier like Walmart, the packaging is going to come from their brand and that leads to serious customer service issues. Mainly, they will get buyer’s remorse, resulting in terrible reviews and poor ratings. These issues could lead to your store being shut down.

Problem #3

It’s not a business.

Plain and simple, with this model of Amazon drop shipping, you’re not building a business. You are building a quick thing, trying to flip a product, and make a couple of bucks. Overall, I don’t recommend this method to anyone for those three reasons.

Amazon Drop Shipping with AliExpress

If you are still set on Amazon drop shipping, 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 saying,”Oh, here’s this branded product, like this Sharpie for example.” Whereas with AliExpress, you could create private label or have no label on it.

anton-retail-drop-shipping-course

For example, you could say here’s “Anton’s Famous Orange Marker”. This 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 dropship Amazon products isn’t without its flaws. If you want to drop ship on Amazon, you’re going to run into the issue of long lead times. Even the fastest ePackage shippers on AliExpress(and I’ve tested all of them just to see) take weeks to deliver the item to your customer.

epackage-drop-shipping

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’re 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, it’s coming back to YOU. Because of this, I do not recommend using AliExpress for Amazon dropshipping.

The way AliExpress drop shippers usually make money is by 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 will tell the world and you could get banned from the site.

Amazon Drop Shipping Domestically

How-to-drop-ship-on-amazon

The third model for Amazon drop shipping is really the only sustainable choice and that is finding domestic suppliers.

The best example I can give you would be if I sold whiteboards and flipcharts. 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 for Amazon dropshipping.

It’s what I teach my members to do for finding their drop shipping suppliers. I use this model because it’s what works.

Think of it this way, basically you’re 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 aren’t. Either way, if it gets returned, the product goes right back to your supplier (instead of your house).

Amazon Drop Shipping Wrap Up

I hope you found this explanation helpful. If you were excited about Amazon drop shipping and I just burst your bubble, I am sorry. But the truth is, Amazon drop shipping shouldn’t be your first or second business.

Because after 10 years in eCommerce, I’ve found that creating my own stores is the best way to drop ship profitably. Working with legitimate brands, developing real business relationships, building a real business, and using Google as the primary driver of sales.

If you want to try Amazon drop shipping, I’d only do it after building a few successful Shopify stores. That way you have a steady income and won’t need to rely on just your dropship Amazon store.

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.

  • Leo Guillot says:

    Hey Anton, Thank you for this wonderful post and it seems very interesting and information. I appreciate your efforts to explain things in such effective way.

  • Kritarthajeet Sengupto says:

    Thanks for the knowledge. I am looking forward for more information about drop shipping, like
    *Step by step instructions to start drop shipping.
    *What do I need to start this business.
    *Risks that I should take care of.
    *What are the government regulations I must factor in?
    *Low hanging fruits that will give me confidence.
    And many more.

  • Arya Stones says:

    Selling on amazon is a exiting and enjoyable task . I started my business on amazon by research on amazon services provider and i finally find out Evantage store of amazon which gives services from scratch to advance on Sell On Amazon, How to Sell On Amazon, Selling Services on Amazon, Amazon Webstore Management.This are the starting and the most important part of selling for more details visit http://www.evantage.store/ and get your wholesale business sales at great height.

  • ömür says:

    What can you say about Dropshipping product cancellation in amazon, how many cancellations per month will cause trouble or how many cancellations

  • Jeffrey says:

    Hi Anton,
    I just want to say that I subscribe to your YouTube channel and I enjoy the content that you put out. I currently have a Shopify store and am using Aliexpress and Oberlo. I know I know, it’s not an advisable model or your preferred method:) Unfortunately, I built my site before stumbling upon your expertise! I have complete paralysis by analysis with all the overwhelming info out there and have not ran a single ad or had sale because I am afraid of failure. I understand that one of your positions is to use Google PLA and then retarget on FB. But, before I dive into more analysis on how to even do that, I stumbled on this blog. It raised another concern that I have and I don’t think it was Q/A’d here yet. If I’m stuck at the moment using the China dropship model…can I workaround the long ship times by having my products fulfilled by using another person’s Amazon FBA supply? Most everything that is on Oberlo/Ali is already on Amazon due to saturation; therefore, I’m thinking I can have my brand store but fulfill out from Amazon when I can. I know it sounds shady. I just feel stuck. Anyways, keep up the great content! Thanks so much, Jeff

    • Anton Kraly says:

      Hi Jeffrey,
      Happy to hear you’re enjoying the YouTube Channel!
      As you can tell from this blog post and video, I do endorse the drop shipping from Amazon method!
      My advice would be to try to find more expensive products within your niche (if possible). Then you can add them to your site and remove the cheap products from China.
      If you’re really starting from scratch I’d highly recommend joining my live training webinar on Thursday. It will answer a lot of your questions + more.
      Here’s the link:
      https://www.dropshiplifestyle.com/ls/webinar/
      Talk soon!
      Anton

  • Mike says:

    What do you think about from Amazon to Amazon dropshipping? For example, from Amazon.ca to Amazon.com. It’s trouble-free because It’s easy to refund, fast delivery, and satisfied customer. It’s not high profit margin as from Aliexpress as but more faster and secure than it.

    • Anton Kraly says:

      I’ve never heard of anyone doing that before… I’d honestly say that even if there’s an opportunity there it sounds more like exploiting a short term loophole rather than building a long term business.

  • Hernan says:

    What’s the benefit for those local companies to have you drop ship their products?

    • Anton Kraly says:

      Hey Hernan,
      The types of companies that I am referring to almost never sell direct to the public. They focus on creating great products and branding and then look to retailers (like us) to sell their products.
      Hope that helps!

  • Max says:

    Anton,
    Here is what I do. I’m buying the items in bulk on Amazon and forward them to the warehouse and selling them thru my Shopify store. Why am I buying from Amazon instead Alibaba? Well weird but there might be a chance to find a better deal on Amazon.
    My question is, can I use Amazon for dropshipping? I read somewhere it’s ok if you don’t use Amazon Prime? what do you think?
    Ps. Sorry if you cover this subject before.
    Thanks,
    Max

    • Anton Kraly says:

      Hi Max,
      If you’re buying items, having them shipped to your warehouse, then shipping them out, that’s not really drop shipping…
      If you have a warehouse and you are OK with fulfilling orders yourself them my advice would be to find a sourcing agent in China that can meet or beat the prices that you’re already seeing. Upwork is a good place to start for finding this person.

  • Ryan says:

    Hey, your post did help me out. I’m running the idea around in my head to start drop shipping, right now I’m just trying to learn a little bit about it before I jump too deep in it. And personally I’d like to use Amazon (no particular reason, just a preference for now, which could possibly change in time)
    Where exactly do you suggest looking for suppliers that would be ok with drop shipping in general? And possibly those that are ok with Amazon.
    Thanks so much.

  • Jasmin vora says:

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

  • Chris says:

    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

  • 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?

  • Jacqui says:

    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 🙂

  • NUR AQIDAH AHMAD RADZI says:

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

  • Rico Williams says:

    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?

  • Maria Rivera says:

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

  • Petra says:

    Hello,
    I am a Thai. I am wondering your beautiful wife is Thai or Vietnamese? 🙂 🙂
    Sorry for being nosy!

  • JeffC says:

    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.

    • Anton Kraly says:

      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.

  • Christal says:

    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!

    • Anton Kraly says:

      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!

      • Happiness says:

        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

        • Anton Kraly says:

          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!

  • Jack says:

    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.

  • Tammy says:

    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!

    • Anton Kraly says:

      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!

  • Mary says:

    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.

  • Anton Kraly says:

    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.

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