Okay, let’s dive into some little-known facts about starting a dropshipping business on Amazon. These are the nuances that often get overlooked but can significantly impact your success (or failure!).
1. The “Buy Box” is King, and You Need to Earn It
- More Than Just Price: Many assume the lowest price wins the Buy Box. While price is a factor, Amazon’s algorithm also considers seller performance metrics, such as:
- Order Defect Rate (ODR): A low ODR is crucial.
- Valid Tracking Rate (VTR): Consistent and accurate tracking is important.
- Late Shipment Rate: Keeping on-time shipping is vital.
- Customer Service Response Time: Fast and helpful responses matter.
- New Sellers Have a Harder Time: New sellers are often at a disadvantage when it comes to winning the Buy Box. It takes time to build a track record and earn Amazon’s trust. You’ll need to focus heavily on providing excellent service.
- Rotating Buy Box: Amazon may rotate the Buy Box between eligible sellers. Even if you have the lowest price and best metrics, you may not win it all the time.
- The “Buy Box” is Not Guaranteed: Even with a perfect performance, Amazon may choose not to award it to any seller under certain circumstances.
2. Supplier Relationships Are Crucial, Not Just Transactions
- Beyond “Dropshippers Welcome”: Finding a supplier that says they “do dropshipping” isn’t enough. You need a partner who understands your needs, especially on Amazon.
- Communication is Key: You need a supplier who is responsive, transparent, and can keep you updated on stock levels, shipping times, and potential issues.
- Quality Control is Your Responsibility: You are liable for the quality of your supplier’s products. Consistent quality checks, even random ones, can protect you from negative reviews and returns.
- Negotiate Terms: Don’t be afraid to negotiate pricing, shipping, or even packaging options with your supplier.
- Explore Multiple Suppliers: Don’t rely on one supplier. Having backup options is vital if your primary supplier faces issues.
3. Amazon’s Algorithm (A9) Is More Complex Than You Think
- Beyond Basic Keywords: While relevant keywords in titles and descriptions are essential, A9 also considers:
- Click-Through Rate (CTR): How often people click on your listing.
- Conversion Rate: How often clicks turn into sales.
- Sales Velocity: The speed at which you’re selling.
- Relevance of Search Terms: Does your product truly match the keywords it’s ranked for?
- Time on Page: How long people spend viewing your listing.
- Internal vs. External Factors: A9 considers both factors within Amazon’s ecosystem (listing quality, sales performance) and outside Amazon (traffic from other websites, social media).
- A/B Testing is Critical: Constantly test different images, titles, descriptions, and even pricing to understand what works best for your listings.
4. Branding is Still Important, Even With Dropshipping
- Don’t Ignore Branding: Even though you’re dropshipping, you’re still creating an experience for your customer. Think about your brand as a curated collection or a way to solve a specific problem.
- Packaging (Where Possible): If your supplier is open to it, even simple branded packaging or a thank-you note can elevate the customer experience.
- Customer Service Tone: Maintain a consistent and positive brand tone in all your customer interactions.
- Bundling and Differentiation: Can you bundle complementary products or offer a unique twist on a common product? This helps with building a brand.
- Trademarking (When Necessary): As your brand grows, protect it with a trademark.
5. The “Long Game” is Often Necessary
- Expect Initial Losses: Don’t expect to make huge profits immediately. Building a successful dropshipping business on Amazon takes time, testing, and learning.
- Patience with Rankings: Ranking high in search results takes consistent effort and can take months, not weeks.
- Continuous Learning is Key: Amazon’s policies and algorithm are always evolving. You need to continuously learn and adapt to stay competitive.
- Scalability is Challenging: As your business grows, you may need to transition to different fulfillment methods or find new, more robust suppliers.
- It’s Not Passive Income: Successful Amazon dropshipping requires active management, not passive.
6. “Hidden” Fees Can Eat Away at Your Profit Margins
- Long-Term Storage Fees: If you’re holding inventory (even briefly), you need to understand Amazon’s long-term storage fees.
- Return Processing Fees: Amazon charges fees for handling customer returns.
- Referral Fees by Category: The referral fee you pay to Amazon varies by product category, so it’s important to factor that in.
- Advertising Costs (Can Be High): Amazon Sponsored Ads can be expensive, so managing them effectively is critical.
- Unexpected Costs: Be prepared for unexpected costs, like shipping delays, defective products, or changes in Amazon’s fees.
In Summary
Dropshipping on Amazon is not as simple as finding a product and listing it. You need to understand the intricacies of Amazon’s ecosystem, build strong relationships with suppliers, and focus on providing a great customer experience. These little-known facts can be the difference between a thriving business and one that struggles. Remember that it’s a marathon, not a sprint, and continuous learning and adaptation are essential.
