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Drop shipping on Amazon: 5 Tips for Avoiding Account Suspension

Since at least 2007, when Tim Ferriss popularized the idea of drop shipping in his book The 4-Hour Workweek, drop shipping has been a primary means of fulfillment for countless Amazon sellers. And what’s not to love? You can work from anywhere, don’t have to have any inventory on hand or handle the difficult tasks of packaging and shipping, and can make good money with the right products – or so the story goes. Alas, it is rarely that simple…

From our vantage point, where we help hundreds of sellers a year with Amazon account suspensions, it is clear that Amazon takes a skeptical view of drop shipping and cracks down hard on any violations of its policies. So, if you’re drop shipping on Amazon now, or thinking about going in that direction, here are 5 tips you need to know to avoid getting your Amazon Seller Central account suspended.

  1. Understand Amazon’s skepticism

If you want to be a successful drop shipper on Amazon, you need to understand why Amazon has reservations about the practice. As with all things, Amazon is simply putting the customer first. Amazon has built its entire reputation on delivering affordable and high-quality products quickly. Drop shippers can achieve affordable, but sometimes struggle with high-quality and often have a hard time with quickly.

For its own fulfillment, Amazon keeps products in fully stocked warehouses distributed throughout the world so it can meet two-day shipping (or faster) on almost everything in its store. It also has superb customer service, including free, no-questions-asked returns on most items. Drop shippers, on the other hand, might have just one supplier in one far-off place, and don’t even order the product and tell the supplier to ship it until the customer has made the purchase. Two weeks can be a stretch for delivery time, let alone two days. Likewise, since the seller never sees the product before it is shipped, it is hard to ensure quality. And since most buyers don’t notice whether they’re purchasing from Amazon directly or from a third-party seller, Amazon sees the entire process as a risk to its own reputation.

“But Amazon explicitly allows drop shipping!” our clients often tell us. Let’s dig in on that. Amazon’s drop shipping policy begins: “Drop shipping, or allowing a third-party to fulfill orders to customers on your behalf, is not acceptable unless…” Not exactly a ringing endorsement! And when you look at the “unless,” it is clear that Amazon expects you to be accountable to the customer, and Amazon intends to hold you to that.

Indeed, the entire drop shipping policy essentially boils down to: Make sure the customer knows that YOU are the seller, not the drop shipper fulfilling the order. Because the customer purchased from your Amazon store, you are ultimately the one responsible for quality and timely delivery.

By requiring that you be the seller of record on any products that you sell, Amazon makes drop shipping very difficult. Traditionally, the very definition of drop shipping would mean that you’re not going to be the seller of record. It’s also important to note that Amazon has a vested interest in pushing sellers away from traditional drop shipping and toward its own fulfillment by Amazon (FBA) program. See, for example, this recent Amazon article on drop shipping that is basically just an FBA sales pitch.

So, yes: Amazon allows drop shipping, but it uses other rules to make sure sellers who use drop shipping are maintaining Amazon’s customer-obsessed reputation. Understanding Amazon’s skepticism is critical to paying attention to those other rules and avoiding suspension. At Appeal Wizards, we specialize in helping clients get inside Amazon’s head and navigate the ever-changing rules.  

  1. Avoid Drop Shipping If You Can

In many of the cases we see, we counsel our clients to move away from drop shipping because their business model won’t be able to meet Amazon’s high standards. Two of the performance violations that most often trip up drop shippers are order defect rate (ODR), which must be less than 1%, and on time delivery (OTD), which must happen at least 97% of the time. When someone else is shipping your goods for you, and they get paid upon purchase, not upon successful delivery, it is hard to ensure that 99+% of your products will arrive in good condition, and that they will arrive in a timely fashion 97+% of the time.

“But thousands and thousands of sellers are drop shipping!” our clients tell us. True, but something in the way your drop shipping works has activated Amazon’s red flags. Tomorrow it might be any of those other sellers, but today you are the one that needs to change course or risk losing your store.

“But I don’t want to buy inventory before I know I have sales!” our clients also often say. Fair, but remember: Amazon cares about its customers, not your bottom line. If you can’t meet Amazon’s performance metrics without drop shipping, you need to find a new business model. Let us know if you need help in making that decision.     

  1. Pick Your Supplier Carefully If You Can’t (or Won’t) Avoid Drop Shipping

If we haven’t deterred you from drop shipping yet, we get it. When done right, drop shipping is indeed convenient and can definitely be profitable. And there’s no denying that thousands and thousands of sellers are, in fact, doing it. So, if you genuinely can’t afford to buy your inventory first (understandable for small start-ups), or you simply won’t walk away from a business model that sounds so good on paper and seems to be working for many others, we still want to help! But here’s where we’re putting our foot down: You MUST pick your supplier carefully.

Remember: According to Amazon’s drop shipping policy, YOU are the seller of record. It’s not the manufacturer or the person shipping the goods. Your store – your profits – depend on your shipper. You are the only one responsible if they fail to meet Amazon’s OTD and ODR. So, pick your supplier like your store depends on it, because it does. If your supplier refuses to identify you as the seller of record on packing slips, or to remove themselves from invoices, receipts, or external packaging, run away! Those are explicit Amazon requirements, and they’re also important for keeping customers happy. Shoppers report feeling duped when they buy something on Amazon that shows up in, say, a Walmart box. They’re annoyed that they paid extra for something they could have gotten elsewhere for less, and angry that someone profited off of them. Worse for drop shippers, it’s easier than ever for those annoyed and angry customers to report it – in comments on returns, in chats with Amazon, and in product reviews – which increases your likelihood of suspension.

Finding a reputable supplier who will take good care with your fulfillment might decrease your margins, but we’re guessing you’d much rather have an active store with slightly smaller margins than a suspended store with no income at all. And if this sounds to you less like drop shipping and more like “single item, just-in-time delivery through a distributor,” you’d be right. Quite simply, the drop shipping that Amazon’s policies allow doesn’t really fall under the traditional definition of drop shipping.

  1. Pay Attention to Key Amazon Account Metrics

We’ve already mentioned some performance metrics that seem to trip up drop shippers with regularity (OTD and ODR). Other common ones include valid tracking rate (VTR) and cancellation rate (CR). It is important to note that outsourcing fulfillment does not mean that you outsource responsibility as soon as you have made a sale. In order to keep your Amazon Seller Central store active, you must keep your account in good health. Make sure you have detailed knowledge of all of Amazon’s policies and requirements, and watch your metrics at least weekly to ensure you don’t have any trouble areas.

If that sounds daunting – let’s face it, Amazon’s policies and requirements change frequently – then we are here to help. Clients who enroll in our Account Monitoring Service get the peace of mind of knowing that professional Amazon compliance experts are watching their account for them, so they can focus on what they do best – selling. This service is particularly important for drop shippers since many of the metrics Amazon cares about will be outside of your immediate control.

  1. If Suspended, Make Real Changes

Given Amazon’s skepticism toward drop shipping, it very rarely gives drop shippers three strikes. In other words: you can usually get a drop shipping suspension once and bounce back, but getting a second suspension is very often fatal to the life of your store. Therefore, we strongly advise against submitting an appeal that you found on the internet or got from someone else and don’t fully understand. Amazon is going to hold you to everything you promise in your plan of action, so it has to be genuine and applicable to your store. If you make the same mistake twice, Amazon will come down much harder.

Furthermore, Amazon is going to evaluate your plan of action for believability. Here’s a specific example:

One of our clients was drop shipping by buying online from Home Depot and having Home Depot ship directly to his customers who had purchased on his Amazon store. That’s a clear violation of Amazon’s drop shipping policy since Home Depot, not our client, was the seller of record. Our client proposed that he instead buy the products from Home Depot, send them to his own house, repackage them, and then ship them to the customer. Amazon knows that that process is rarely profitable (let alone efficient), so it rejected the plan of action because it didn’t believe that the seller would actually stick to the arrangement.

To get your selling privileges reinstated, Amazon needs to believe that you are making real changes and will not make the same mistake twice. Our Amazon seller central experts can help you craft an appeal that is unique to your store and achievable.

While drop shipping poses significant risks to Amazon sellers, it can be a successful business model if done right. Use these five tips to steer clear of a dreaded Amazon account suspension, and let us know if we can help you navigate Amazon’s constantly-changing rules, or get your Amazon seller central account reinstated if it’s already too late.

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