Amazon is a great platform to start an eCommerce business. There are a few different business models when it comes to selling on Amazon. We're going to dive into dropshipping and what the pros and cons are.
Dropshipping is a business model where you don't have to keep any products you sell on hand. Instead, when a customer purchases a product from you, you purchase the item from your supplier, and the supplier will ship directly to your customer.
Now that we've discussed the business model, lets talk about some of the benefits of dropshipping such as low overhead costs, no warehousing, no buying bulk, etc. However, there are also downsides to this model such as high shipping cost, difficulty of returning items, etc.
- Low start up costs: you can do the business model yourself. You don't need to invest thousands up front, especially if you're just starting out.
- No warehousing: your supplier will be housing all the products for you.
- No buying bulk: you can work with suppliers that has a MOQ (minimum order quantity) of 1 which is perfect for those who can't purchase bulk items.
- Zero stock/Inventory: your supplier will have the stock for you, so you don't need to worry about having them on hand.
- High shipping costs: sometimes suppliers may not have free shipping - which could potentially eat your profit margins.
- Difficulty of returning items: suppliers could have a smaller return window than what you have for on Amazon, which could make it difficult to return items.
- Product quality: since you're not handling the products yourself, you can't be certain that the items you're selling are of quality.
Dropshipping is an ideal business model for entrepreneurs who want to start their own eCommerce store with little upfront investments.