Dropship on Amazon - is it possible?

M Ryan M Ryan

Amazon is one of many marketplaces on which a seller can list products for sale, and it is possible for fulfillment to be handled by a dropshipping supplier. Here is how to do it.

Dropshipping

Dropshipping is one method of ecommerce fulfillment - the process by which a merchant (seller) processes a customer order and ensures the customer receives the product(s) they have ordered.

The critical aspect of dropshipping is that the seller does not buy any inventory to hold against the hope of future orders. Instead, when a customer order is received, the seller immediately places an identical order on the dropshipping supplier to send the product directly to the customer. The seller never handles the physical product.

For more detail here is an article I wrote on ecommerce fulfillment options and considerations. And here is an article specific to dropshipping, its advantages and disadvantages. If you are unsure, use these to work out if dropshipping is right for you.

Amazon and third-party sellers

Amazon is the biggest online retailer and still growing massively, with annual revenue of $386 bn in 2020, up from $280 bn in 2019.

The majority of Amazon's retail sales are not of products stocked by Amazon themselves, but instead are sales of products listed by third party sellers, who can be individuals, right up to large corporations. In Q1 2021, 55% of units sold on Amazon were from third party sellers.

After considering the pros and cons of selling on Amazon, and when listing products on Amazon for sale, the seller must choose how they will fulfill customer orders. This will either be Fulfillment By Amazon or the seller must fulfill the order themselves (including by dropshipping).

Fulfillment By Amazon (FBA)

To use the Fulfillment By Amazon (FBA) service, the seller sends physical stock to Amazon for them to store in their warehouses, and Amazon staff will pick, pack and dispatch that stock on receipt of a customer order. This is not dropshipping, as the seller still needs to buy stock ahead of time and pay Amazon to store and handle it in their warehouses. 

Fulfillment by the seller / dropshipping

The other option for the seller is to fulfill customer orders themselves. This could be through their own warehouse facility, or through a dropship supplier. To use drop ship, each time an order is received through the Amazon seller portal, the seller needs to route this order to their drop ship supplier, with whom they have contracted ahead of time to fulfill their orders of this product.

The fulfillment type is chosen by the seller on an individual product by product basis. A seller can fulfill some products themselves, some through dropship and others via FBA.

 

This article was updated on June 24, 2021

M Ryan

M Ryan is an ecommerce consultant with twenty years experience working with retailers, consumer brand manufacturers and other consumer-facing businesses helping them to develop their ecommerce strategy, implement ecommerce technology and improve their ecommerce operations. He works extensively throughout US and Europe, with clients including global brands, large retailers and household names in consumer goods.

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