What I've learned from Dropshipping to Amazon

After playing around with the dropshipping model for the past month, I've come to the conclusion that there is--no free lunch. Maybe someone could correct me on this, and hopefully so. However, it would appear that the only way to make money on Amazon with dropshipping, would be:

1. Deal strictly with items that have MAP requirements. Basically securing a price bottom. You don't want to be competing on price with Amazon or other wholesalers with very deep pockets--you're going to lose. Normally you must have several trade/business references to get approved by the manufacturer to be an authorized reseller for MAP items. Kind-of a catch-22 situation for new dropshippers.

2. Only deal with wholesalers that offer free shipping with no per-item dropshipping fees. [I would rather pay a onetime signup fee. Per-item fees kill you in the long-run] A $3.00 per-item fee on a $30 item is 10% off the top, plus shipping of at least another 10%, plus another 10-15% in Amazon fees. So you have to make about 40% just to break-even.

3. Sell items in the $100 - $300 range. Fast turnover, higher per-item margins.

4. Find a wholesaler who's prices are at least 20-30% cheaper than Amazon prices. [In many cases Amazon's retail prices seems to be cheaper than many of the "wholesalers" that I've found, particularly when not buying in bulk.] However, It is not that hard for the wholesaler to just open an Amazon account and sell directly for near wholesale prices on Amazon either.

I haven't found any wholesalers, particularly in the customer electronics & accessories category that fit all the criteria.

If there are any members out there, that have successfully run a long-term business dropshipping on Amazon (or Ebay) I would really appreciate some additional input.

Hi Dominic and welcome to the forum,

I can see that you've been doing some heavy research there. A few points I would make. Trying to compete with wholesale sellers is a losing game unless your pockets are just as deep. It's one of the biggest I see among members, trying to compete against a wholesale supply model with a dropshipping model.

It's going to lose every single time.

In regards to only deal with suppliers that offer free shipping. Well they say there is no such thing as a free lunch and that's very true with an e-commerce business. Products cost money to ship, it's an unavoidable expense that someone has to pay somewhere along the line. If a supplier is offering you free shipping, then the cost of that shipping is hidden somewhere for sure.

I'm not sure what calculation you used to come up with the 100-300 sell range. Typically a margin isn't set by the value of an item, it's set by the market. For example, a high turnover product will usually have a much lower margin in it than a slow turn over item because the profit can be made in the sales volume of the product itself.

There may be some relevance as to an average consumer spend per purchase that relates to the 100-300 price range, but not so much relating to margin.

I think you need to understand that there is no such thing as wholesale if you aren't buying in volume. I mean you can't just go and buy one item from a genuine wholesaler and get a genuine wholesale price. Wholesale prices are based on volume, the more you purchase per item, the better per item price you secure (within reason of course) So when comparing wholesale prices, you need to compare prices with accurate volumes to get an accurate comparison.

My reference was in regards to fixed per-item dropshipping charges. What I was trying to say was if you have have a $3-$5 dropshipping fee per-item, you shouldn't be selling $10 items. The more expensive the item, the less of an impact those fees would have on your margins. However, if the item is too expensive it might be hard to sell. That's where I got the $100-$300 range from.

Sorry, now I see your point. :)