Amazon’s Drop Shipping: Understanding Fee Structures Can Help You Run a Successful Business.
What’s the Cost of Drop Shipping on Amazon?
Dropshipping is an excellent way to start a business with virtually nothing, but only entrepreneurs who do it right manage to break even.
Aspiring entrepreneurs now have a platform to launch andrun a web-based businesses minus the worry of a warehouse or the upfront purchase of inventory.
In a nutshell, the amount one needs to launch and run a business online has reduced a great deal. But that convenience is not for free, Amazon makes you pay.
A business must follow terms & conditions, and incur some costs as we are about to discover.
What are the terms and fees?
Amazon’s drop shipping service prohibits the seller from purchasing products from third-party firms and the sell through. Its platform.
The products must flaunt your brand’s name and logo, and must be delivered by your company. By doing so, they ensure all merchants using their service pay a certain fee.
Amazon dropshipping fees vary. Many times what you pay in fees depends on two things; whatever you sell and how many sell every month.
A merchant can choose between twofee plans; (1) Individual Plan & (2) Professional Plan.
Any dropshipper who chooses the Individual Planpays .99 cents for every product sold + fees. It works fine for a retailer who plans to sell less than 40 products in a month.
In contrast, the Professional Plan goes for $39.99/month + fees,and there’s no limit to how many products you can trade. On top of that, it opens doors to Prime shipping, which ensure quick product shipment.
What do you Plan to Sell, How Many/Month?
The above fee models are only the tip of a larger ice berg. Amazon dropshipping fees go deeper than that as you will soon realize.
The structure is complex that Amazon has built a dropshipping calculator into its website tohelp wannabe drop shippers work out their fee.
Amazon consider lots of factors when working out the co. Some of them include;
- It’s size
- How much it weighs
- Fulfilment fee (because Amazon does everything including packaging, storing & shipping),
- Referral fee.
That being said, whatever you want to sell through drop shipping has a great impact on the amount you pay in Amazon dropshipping fees.
Work out Your Fees to Make a Decision.
Wannabe dropshippers are advised to use thedropshipping calculator in Amazon’s website to calculate anticipated costs. Doing the math upfront will help you learn if the idea is worth your money and time.
From one point of view, the per-month plan worth $39.99 seems like a reasonable approach. However, business that choose this approach must prepare to sell products for much more to counterbalance the fees.
Why Weebly's Boss is Against Drop Shipping
Dropshipping is increasingly becoming a well-liked trend in e-commerce. However, Weebly’s CEO and Founder, David Rusenko is not for the idea.
Even though this site-building platform has continued to serve more and more merchants, Rusenko is ready to completely cut off that particular set of users. He feels that this idea may further promote the mass production of cheap crap products which is already a global challenge.
In essence, drop shippers are like middlemen in e-commerce. Their key role is exposing shoppers to items that they would have otherwise not come across.
For instance, drop shippers organize listings on Amazon for a product that you can only find on eBay and charges an extra $10 or $15.
Buyers purchasing in Amazon will meet the dropshipper's set of items on eBay. If a customer makes a purchase, the dropshipper directly buys it from eBay and ships it to them.
This new method of buying goods can lead to complications, especially in cases where a customer is dissatisfied and wishes to make a return. If the trade is conducted directly from a retailer like Amazon then making a return is a smooth process.
The same doesn’t apply to situations where a middleman is involved. In fact, customers are often frustrated on realizing the extra fee they paid went to a merchant account for drop shipping merely because the middleman listed the product.
Even worse is the fact that a buyer will always blame the original brand creator even when it wasn’t their mistake.
Fred Ruckel, the inventor of Cat toy, was a victim of similar circumstances back in 2016 and was only able to cut off drop shippers by withdrawing the brand’s products from Amazon (however, Ruckel recently put back his primary product on the site).
The other disadvantage of this practice is that intermediaries tend to source the merchandise they sell from cut-rate Chinese markets, e.g., Aliexpress. This kind of shipping is common in Shopify sites and other independent e-commerce websites.
And they have developed a web of software to automate the process. You can come across ads for dropshipped items on social media, e.g., Instagram & Facebook. And one mistake drop shippers make is failing to inform customers on the negative side of buying from an intermediary.
While drop shippers make the most of the extremely low wholesale prices from markets like Aliexpress, they forget to look into quality.
Plus, a customer has to wait longer due to the slow shipping process. All these are factors that could lead to poor customer experience.
According to Rusenko, the trend is a failure, and he is willing to miss out on some merchants to stand against dropshipping. He says the trend is the direct opposite of Weebly's mission and purpose which is to assist creative entrepreneurs.
3 Main Tips for the Success of Your Drop-shipping Business.
Drop-shipping is a retailing method where merchants purchase products and have them shipped directly to customers, having not handled the items themselves.
This unique retail model is advantageous as it needs only a little capital to start and operate. Launching a drop shipping operation does not require investing large sums of money in inventory. You only purchase a product after you have finalized the deal with your customer.
Moreover, a dropshipper has very low overhead expenses and a wide selection of items to sell.
That said, dropshippers face many challenges on eCommerce websites.
If you are new in the game, the following are three useful tips which you can apply to deal with some of these challenges.
1. Low-profit margins.
The biggest challenge that drop-shippers face is minimal profits. For each item sold, a drop-shipper only retains a small profit, which is made even smaller by the cut-throat competition.
To rake in the big bucks; therefore, a merchant has to make as may sales as possible, which brings to light yet another challenge: too much work.
However, you can minimize the time required to process sales by posting similar items as multiple listings with a fixed price so that you only have to make one compelling listing, and then include new items as they come in.
2. Variable pricing.
The price tag a drop-shipper attaches to an item usually depends on the price set by the supplier. Consequently, the merchant is not in control of price changes.
This situation is even worse in bidding sites like eBay, where the buyers dictate the item’s price through competitive bidding.
To gain more control of your item’s prices, fixed price listings are the way to go.
Alternatively, you can put a reserve price on your item and accept bids from the set minimum.
3. Product availability.
Stocking your items is a hassle, but it helps you to easily track which ones are available for sale, and which are out of stock.
By sourcing items from multiple suppliers who also have other orders from other merchants, a drop-shipper runs the risk of selling an unavailable item.
The only way to go around this hiccup is to ensure your store is in seamless sync with your suppliers, through daily reports about what they have in stock and how they envision the inventory to change.
This will help you to keep the buyer fed with correct information about an item’s availability and when it is expected to arrive.
Drop shipping might be easy to start, but to ensure success, it demands just as much hard work as any other income-generating endeavor.
Doing business and shipping via Amazon is a new approach with its set of best practices and rules.
You want to spend weeks of research familiarizing yourself with the dropshipping process so that everything runs smooth when you begin.
Lastly, numbers don’t lie. Always use the dropshipping calculator to work out an estimate of your profit margins upfront.
Because of the many fee factors involved, you want to begin with the mathematics to avoid broken expectations.