Drop shipping is selling products on a website or 3rd party site (e.g. eBay) then contacting a supplier to send out the products.
For example, you have a website with tons of products, but the physical stocks of those products aren’t actually held by you. When someone buys a product from your website you will then email (or automatically integrated with your supplier) your supplier for them to send it out the customer.
The customer pays you for the order, then at the end of the month you pay the supplier.
A positive part of drop shipping is you don’t need money upfront to invest in inventory.
However there are some issues such as:
- • Potential lack of transparency of stocks levels with suppliers
- • Products might be delivered late
- • Unable to build your brand
AMAZON FBA vs DROP SHIPPING
Amazon has its form of distribution called FBA (fulfillment by Amazon), where you send your products to Amazon, they store it for you, dispatch it and Amazon takes care of the customer service for you.
Just like drop shipping you no longer need a warehouse to stock your inventory.
Amazon will do it for you.
USE AMAZON AS A DROP SHIPPER
If you are looking at building a real business with a brand of your own, you are better off investing in stock to build your own product line of products.
It does involve more upfront investment, but has greater long term results.
If you are low on funds and wanting to get a quick return, then using Amazon as a drop shipper and taking orders via your own website is definitely an option.
OUTLINE OF THE EPISODE
[02:11] Drop Shipping Issues
[03:30] Amazon FBA vs Drop Shipping
[04:35] Setting Amazon as drop shipper
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****** Full Podcast Transcription below *******
DROP SHIPPING ON AMAZON
Today is a really exciting article about drop shipping and its relationship with Amazon. So, I remember drop ship was pretty big even going back close to 15 years in. I remember when my colleagues and I used to work in I.T. Sort of drop shipping business. I think it was monster.com I can’t remember the name but he had about 3000 products all with different suppliers.
In those days it was a nightly feed that went through people go to his website and get an order. Then he sends a feed to the relevant supplier and send it out. So, just take a step back what drop shipping is and how Amazon FBA Expert helps to deal with their tricks ,where you have a website, you advertise a product someone buys it from your website but you don’t actually have physical stock of that product so that product is actually with someone else. Then you send an email or an automatic notification to the supplier saying send this one out at the customer. Then at the end of the month you now pay the supplier but you get paid from the customer straight away.
One really good thing about this is it doesn’t cost any money for inventory. So, you have a website and my mate who had about 3000 products and he didn’t have anything in inventory. He has a really good website that was much cheaper to sell. Well not so much. Fifteen years ago, there was no word press easy integrations or Shopify. But these costs were really low to set up and at the start he really loved it, and we’ll get to how this relates to Amazon soon. He really loved it because he would get his phone use to make a beep noise every time you order. He didn’t have to do anything. Notification go to supplier, supplier send out the order and he’d be paid straight away. Plus, you would have to pay suppliers till the end of the month.
So, for the first three weeks he thought he had hit the absolute gold mine that this is the new way of living and creating a multimillion dollar business. But within about the first end of the first month he realized there was a major problem. And when you don’t own the supply chain or the distribution chain. So, when you’re not the one who knows and the products being sent out or the quality control there becomes lots of issues. What he found was that it sent an e-mail to the supplier that the supplier may not tell him that the product was out of stock. So, there’s no automatic feeds and this is out of stock or the supply may get it and say, actually we’ve got our customers first we’ll send this out at the end of the week.
So, customers were getting their products late. And then what he also found is he had no branding that when the product was sent to the customer the supplier would send it out and then the customer was, great! but the customer had their company label and all the details on there so when they went to order again their customer actually went back to the supplier not the drop shipper.
So pretty quickly, he found some issues and it was mainly all around the customer support. Pretty much he found the suppliers weren’t always updating their stocks, and going back 15 years they didn’t have real time integration but also the fulfillment wasn’t great they weren’t fast. The tracking orders and a lot of these things are being changed now. But he found there’s a lot of issues, and with about three months he closed it down even though his first month was fantastic and then that’s where it compares to Amazon because Amazon has a fulfillment by Amazon FBA Expert at Amazon FBA where you actually send your products into Amazon, Amazon stocks in the warehouse, get in order, labels it, pick it up send out tracking number automate to the customer.
All those things are taken care of for you under the favorable Amazon Seller Consulting Services. And that’s one reason Amazon doesn’t like FBM so this is almost like drop shipping, Amazon becomes the front end where you buy, but you fulfill it have your own warehouse or home. And Amazon isn’t like that because it’s the same problems as with the drop shipping had this issue where Amazon took the money from the customer, the customer thinks that’s Amazon’s branding but it’s actually up to the merchant to send it out. And sometimes a merchant can be slow in sending out it’s unreliable. You almost get to back to an eBay model and that’s why people are moving in droves off eBay and onto Amazon with the effective Amazon Seller Consulting Services because the model on eBay is just not reliable. I rarely ever buy on eBay unless I can’t find the product on Amazon.
The reason being you don’t know all the qualities like but also the shipping is really unreliable. Sometimes you’ll turn up next day and turn up a week later. So how does this relate to Amazon. If you’re a drop shipper I would actually take a look at instead of drop shipping. So, according to the Amazon FBA Expert there is one option you can do is drop shipping. You have your web site and actually integrate now with Amazon through Shopify. See if there’s another supply you integrate to the automatic order.
But I’d actually look at using Amazon as the FBA option. I’d say look I’m going to be happily invest in some stocks and products and I work and only do that so I can build the brand. Because when you drop shipping it is very low cost to set up, you never building up your own brand using other people’s fulfillment services other people’s brand selling products and very quickly they can just say guess what Joe we’re no longer letting you sell our products you’re out of the game or you’re going to try to sell the business and someone says what business am I buying here. There’s no real brand behind it.
If you find an area you are interested in and then build a brand around it you’ve actually got a tangible asset that’s much easier to sell and then it’s much easier to bring complementary products around that. So, we always look at saying okay guys let’s find recommending you the Amazon Seller Consulting Services for something you’re interested in. I mean even if you’re not interested in, something that you know you can be an authority on so when you get those products to test and you actually look and say yes this is a really good product. It’s got the top quality.
We came to the solution as discussing it with the Amazon FBA Expert that a brand is a good option because even I’ve been guilty of this going back a few years I was just trying to find any product that was making money and back then you could put an ad on and sell. But the problem with that, they’re all separate solid products so there’s no synergies across assets so let’s say you are selling an automotive part in one part here, you’re selling sports item over here and your customer database is totally different your social media audience is totally different.
You don’t get synergies of building up a big list you get a list of a thousand here 2000 over there all separate categories aren’t related. Whereas going down to one brand you build a long list or your assets relate to same product. It’s much easier to build a brand, so people have approached me about drop shipping how do I expand it on Amazon with the Amazon Seller Consulting Services. I say Amazon is not really the platform for it unless you can actually work with a supplier who allows you to integrate to their platform or allows you their account access seeing go in and ship the products out through them. I suggest, look, I would recommend taking a different change in strategy I’d recommend saying take a step back put some money into some stock and start building that brand up for years.
So I build a real business with the Amazon Seller Consulting Services because when you dropped shipping I find that they’re are not really large or scalable businesses. They’re not businesses that you want to come along by. Whereas if you build up your own brand. Yes, you can sell up on Amazon and has something to build up. You can also take it off Amazon and build your own web site and build that brand that way. And then the logical step after that is once you go from Amazon you own website you actually looked at bricks and mortar chains in the US or in Australia or your country that actually has happened with one of our products, where we didn’t even move on to Amazon.
We just kept on our own branding and we got into a couple of chains so we’re going to do that through having a branded product not through the drop shipping. So, if someone said to me how can we use drop ship on Amazon and say look, you can use it if the supplier you’re working with allows them to integrate into their marketplace. And there’s some technical things you need to know and our Amazon Seller Consulting Services offers the tools for it that is very simple or they can give you access so you can just actually log in and just ship out from their account. But, most of those times they’re not too keen on that because of the issues of having access to all their stock. What do they actually say those guys look take a step back think about changing business model.
Think about long term, probably all these businesses. Your first order is not going to be making money drop shipping it is very quick cash in quick cash out. Brandings is much more of a longer play where even on your first order you get in. You’d normally just breaking even on that because you’re building up your listing, building up your reviews or those initial setup costs but then from then on that’s where your money comes in.
So, I’d say look guys drop shipping was a market not my place where I’d recommend I know lot people do it successfully. If you’re keen on that then speak to a drop ship expert and work with them because I know a lot of people make it work but it’s not in my space, I’d say look take a step back to Amazon Seller Consulting Services look at building a brand. Find out that product you really interested in, go back and maybe listen to one of the earlier podcast as we talk about product selection criteria by Amazon FBA Expert and that’s where it really starts. Because getting that right product, is really the basis of building a business.
And when I work with more individuals rather than some companies we work with companies but we also design one on ones, on the one on one it is really about how do you get that right product from the start and it does take a lot of time. But if you’re going to any business, set up any business if you were in a store front you are there eight to five every day was for your initial product you probably need to put in those hours the start as well because you need a product that’s different, that’s differentiated that’s really going to be a great winner.
This is a bit of an off topic one today about drop shipping. There is opportunity there for it. It doesn’t really a line well with Amazon and if you are on drop shipping maybe take a step back and look at building out that brand.
So, guys hope that help today look, our business here is about helping people succeed online especially businesses we love working with businesses doing well than 2 million a year or want to make a big splash with their brand kicking off. And we also help mums and dads with their one on one coaching at the start in terms of how we’re going to terms on how to make a success how we pick their product discussing with Amazon FBA Expert.
So, guys if you feel like reaching out to me firstname.lastname@example.org I’d love to help you guys hope you got some value out of this article remember take action.