A drop ship arrangement is one in which you do the selling and someone else does the shipping. In theory, it’s an easy way to get started selling products online, but in reality it’s no cakewalk and I’ve seen many horror stories – including seller account loss on eBay and Amazon.
Especially if you are new to selling online, PLEASE heed this warning!
I haven’t heard a really good drop shipping success story (by someone NOT selling or endorsing a course about drop shipping) in years. If you are going to have success with a drop shipping arrangement it will almost certainly be the result of an exclusive arrangement that you seek out and secure on your own (not from a directory). For example, a good arrangement would be a local widget maker who allows you to represent them on eBay, and they agree to quickly ship whatever you sell, accept returns, and keep you up to date minute to minute on inventory levels.
When it comes to Amazon, if you are anything except a VERY seasoned Amazon selling pro with VERY strong ties to your sources (for example, you know the NAME of your contact and you talk almost DAILY and send each other birthday cards etc.), then DO NOT DROP SHIP ON AMAZON. Even if you meet all those qualifications…be VERY cautious. Drop shipping is an unforgiving minefield.
99.9% of the time the best course of action when selling online is to take possession of your inventory or make sure it’s in the hands of someone you TOTALLY trust at all times.
You MUST know your inventory levels as well. If your source runs out of inventory ONE TIME on an order placed by a customer on Amazon – you could lose your account. It’s simply not worth the risk.
You’ll find far better margins and stability elsewhere. Avoid drop shipping until you are very good at selling online and you’ve developed very structured and transparent relationships with exclusive sources. Done any other way, the drop ship model could bring your business down in a day at any point with a single miscalculation about inventory levels, a return, or a mislabeled box.
This is why I love the FBA (fulfillment by Amazon) model where your inventory resides safely at an Amazon warehouse and Amazon stops selling your items when inventory hits zero. FBA has all the benefits of drop shipping because you send all your inventory to Amazon and THEY do the shipping. As long as your profit margin is big enough, this is a fantastic arrangement. Learn more at ProvenAmazonCourse.com
Especially if you are a newbie, please don’t fall for the “easy sell” pitch of drop shipping as a viable place to start your online business. It’s a minefield and entirely violates Amazon policy the way most people are doing it.
Frank Critelli says
May 3, 2016 at 10:16 amI am newbie and a while back signed up with a company called DS domination although I have not started yet there are people over there doing quite well they do nothing but drop ship..Any advice or experience with this..
Jim Cockrum says
May 3, 2016 at 10:33 amMy advice? Don’t drop ship if you are new to online selling. It only takes ONE return, improperly labeled box, improper insert in that box, out of inventory notice from your source, or a wrong address to raise a red flag with Amazon and you could lose your account. We don’t teach or endorse drop shipping for that reason – we’ve heard far too many horror stories. You are running the risk of violating Amazon policy with drop shipping in nearly all cases.
iaraji says
May 3, 2016 at 11:13 amThanks Jim. For sharing your thought. I am guilty of falling for the temptation of D-S. After your response to my query in the forum, I quickly pulled down all other listings which I was planning to D-S. However, I already got one sale before posting the question. The item has now been delivered and I am praying the buyer is happy with the pair of shoes.
After reading your response, my mind raced to a toy I bought (or so I thought) on ToysRus sometime ago, Even after paying, the toy was not delivered after 2 weeks. So I asked for the status of the order only to be told the item was out of stock (although I was compensated with a discount code for future purchase). You guess is as good as mine if that toy was a D-S item.
I gave the above experience just to buttress your point on knowing the supplier’s INVENTORY LEVEL. As in my case, not even the mighty Toy r us can guaranty stock availability.
Thanks again for the warning. Truly appreciated
Jim Cockrum says
May 3, 2016 at 12:35 pmEXACTLY what i’m talking about. Not enough attention is paid to those sort of high risk transactions. Any of those stories could end with “seller account permanently suspended”.
Tiamaria says
June 9, 2016 at 5:03 amThis is exactly why drop shipping is not recommended on Amazon. Many of the big box and other drop shipping companies drop ship themselves. It sometimes takes months for items to come back into stock. ….EVEN when they say it will be a few days. The promise and the reality are 2 different things. This is why I recommend that selling items that can be sourced locally when an emergency arises, or keep a few of your higher sellers on hand just in case. And these emergencies WILL arise. With the amount of stores that are refusing to drop ship you must have quick & easy access to your products
Frank Critelli says
May 3, 2016 at 11:40 amJim Thanks for getting back to me with sage advice…
Michael Vitamvas says
May 3, 2016 at 12:36 pmI added some drop ship items to our website and it has worked out well but I do know the owner and they run a really good organization plus there is a inventory sync between their inventory and my website. I do list some of the items on other stores beside Amazon and overall that has worked well also.
I have found the margins are not as good as what we made ourselves but with no inventory it works out plus we are using part of the proceeds from our drop ship account to support an orphanage in the Dominican Republic.
Jim Cockrum says
May 3, 2016 at 12:45 pmIf you drop ship from your own website it can be a good model for sure. I’m more aiming my article at newbies trying to drop ship creatively on eBay or worse yet, on Amazon.
Jim Cockrum says
May 3, 2016 at 12:46 pmI’ll re-emphasize however – drop shipping is NOT an easy biz model by any means. Getting traffic to your own site is WAY WAY harder than picking up new customers on Amazon for example.
Raleigh Jacobs says
May 4, 2016 at 1:50 pmHi Jim, Thank you for the super helpful article. May I ask your opinion of the business model where people list products on Ebay and then fulfill via Amazon using prime with a gift receipt. I don’t want to say where I learned about this, but I think there is also a chance for disaster if you can’t fulfill the Ebay item, or if Amazon suspects your using your prime account for business. Any thoughts or insights you may have on this sort-of-dropship method are greatly appreciated.
Jim Cockrum says
May 4, 2016 at 2:59 pmBad idea. Don’t do it. That’s my opinion.
Jonathan Bossaer says
May 18, 2017 at 5:27 amHi Jim, great post 🙂 I wasn’t planning on doing any drop-shipping, just bumped on this article because i was reading another of your blogposts (“http://bit.ly/2qv3uPL”), which was very enriching as well (and far more relevant to my young business). I wanted to kindly ask if there is a possibility to know when your posts have been written. Sometimes I can “guess” it from the comments below, but it would be great to see the date next to the title. Just an idea … Thank you anyway for the always amazing (free) content 🙂