By Cyril Shaw, Special.
Let’s figure it out.
First of all, what is dropshipping and what do you need to dropship?
Dropshipping is a business model based on selling products without keeping them in stock.
How does it work?
You’re supposed to have an online store. You make arrangements with reliable suppliers from an ecommerce retail platform and place their products with marked up prices on your website. After a client makes a purchase at your online store, you reorder the very goods from your suppliers to your clients. The difference between your and suppliers’ prices is your profit!
Advantages of dropshipping:
+ No need to keep products in stock
+ No need to have staff and pay wages
+ No need to pay for warehouses
+ No need to do anything (if process is automated)
What do you need to run a dropshipping business?
- a) create an online store
- b) choose an ecommerce retail platform which cooperates with dropshipping store owners
- c) choose reliable suppliers and interesting products to sell
- d) install software for the process automation
As you can see, one of the main requirements for running a dropshipping business is choosing a platform which is ready to cooperate with owners of dropshipping stores.
What is Amazon and how does it differ from AliExpress?
So, what is Amazon?
Amazon is an ecommerce company specialising in online retailing.
How does it differ from AliExpress?
It may seem to you that Amazon and AliExpress are almost the same companies, and it’s just up to you which of them to use for your dropshipping business. However, that’s not exactly true. These companies differ in most aspects of their ecommerce activity.
Why is AliExpress better suited to dropshipping?
AliExpress differs from Amazon because of its philosophy. AliExpress is an ecommerce platform that is used by small-scale Chinese businesses to distribute the products they manufacture. AliExpress itself, actually, doesn’t sell anything or store somebody’s goods. It only provides entrepreneurs with the platform to showcase their products, meanwhile, charging a relatively small fee.
Amazon, in its turn, is engaged in the system of direct sales. Amazon itself not only acts as a supplier, but provides its sellers with warehouses, thinks of logistics, and so on. What is more, Amazon doesn’t target small entrepreneurs the way AliExpress does. Amazon mostly deals with large companies, barring the way to the small business. That’s why the prices for the same products on Amazon are significantly higher than on AliExpress.
So, this is the first reason why Amazon is not perfectly suitable for dropshipping.
What does Amazon think of dropshipping?
In order to run a dropshipping business, the ecommerce retail platform you’ve chosen should welcome dropshipping as it is. And as for the suppliers from AliExpress, they, indeed, encourage dropshipping for a number of reasons. First of all, it’s more profitable for AliExpress sellers to deal with the owners of dropshipping stores because the sellers, in that case, don’t have to promote their products. Moreover, dropshipping store owners become their regular customers. That’s why, in most cases, AliExpress sellers provide dropshippers with discounts.
Amazon, in its turn, declares that it allows its sellers to work with dropshippers. But, in fact, we understand that the platform doesn’t want to deal with dropshipping store owners. Why? Amazon’s system of rules includes several requirements which exclude the possibility of doing “classical” dropshipping by means of this platform. According to its dropshipping policy:
- Being an online retailer on Amazon, you are not allowed to make purchases from other online retailers and ask these retailers to send the order directly to the initial customer.
Wait a minute, is it necessary to register with the platform as an online retailer? We would like to act as a dropshipping store owner. We don’t want to register with some websites. We would like to do “classical” dropshipping. But that’s also not as simple. Amazon dropshipping policy states that:
- If you’re an online retailer on Amazon and you would like to fulfill orders through a dropshipper, you can not send your buyer a package that contains invoices, stickers, or other elements indicating a seller’s name or contact information that is different from your own personal details.
Moreover, you must do next:
- Identify yourself as the seller of your products on all packing slips, invoices, external packaging, and other information included or provided in connection with them.
What does it mean for you as an owner of a dropshipping store? Each package which you reorder from this platform to your customer is going to include different elements which indicate the name of a true supplier. In that case, your customers are highly likely to have some questions for you.
How can you use Amazon for dropshipping and why it’s not profitable?
In fact, in order to sell through Amazon you are supposed to register your store with the platform. Why isn’t it profitable? If you act as a regular seller, you have to keep products in stock, pay for warehouses, pay wages, be responsible for delivery, and so on. As you can see, if doing so, we lose all the advantages of dropshipping and voluntarily give up the things which make dropshipping so attractive and profitable.
Summing up, we found out that Amazon doesn’t suit that kind of dropshipping we got used to. If dropshipping through Amazon, you have to reveal your hand and tell your customers that you are running a dropshipping business. You have to explain that you are not the actual supplier. If you decide to register with the platform and act as a regular seller, you’ll have to take responsibility for storing products, maintain staff, provide delivery, etc. In that case, this business model loses its benefits and becomes unprofitable. AliExpress, in its turn, encourages dropshipping and makes it significantly lucrative.
Cyril is a freelance content creator, entrepreneur, successful dropshiper. He aims at explaining the dropshipping business model as simple as possible. He is sure that in order to run a dropshipping business you don’t need to have any background knowledge of this ecommerce activity.