Season 1, Episode 14

Are you dropshipping the wrong way?

Dropshipping is a common business model used among sellers. We go over the best way to use dropshipping as a selling method on Amazon and what to avoid to ensure that you don’t put your account at risk.

Show Notes

Transcript

Chris: [00:00:07] Hey everybody. Welcome back to seller performance solutions. I’m your host, Chris McCabe. I’m a former Amazonian and current Amazon seller consultant. And I’m here with another wonderful consultant, Leah McHugh, who works with us here at e-commerceChris. Today, we’re talking about drop shipping, but also just the concept of, and the requirement of having documentation in hand before you list or sell anything on Amazon. Because every week I’m continually reading mountains of emails and having conversations with sellers who are saying, why am I suspended for inauthentic for these ASIN’s? Or why is my account down? Because of items I have never sold, I don’t have invoices to send to Amazon and show them. I don’t have a specific supplier to show Amazon for verification because the items haven’t sold. Leah, you and I have been talking about this for, I guess, years at this point. But especially the last 12 months, you have to have that documentation in hand. You can’t appeal telling Amazon, I don’t have invoices, those items have been sold, I’m a drop-shipper.

Leah: [00:01:16] We tend to get into back and forth with these sellers about is drop shipping, allowed on Amazon? And yes it is, but they still expect you to have the same amount of documentation as anybody else selling through a different sourcing model on their platform. So they don’t care if you’re a drop shipper, they want to see the documentation that they’ve asked you for.

Chris: [00:01:37] You don’t get some sort of drop shipper exception and it’s not relevant whether or not the items have sold yet. That seems to be the big psychological or mental sticking point is, well, I don’t have invoices on my drop shipper , but these items haven’t sold and I’m going to appeal on that basis. Do not do that. That’s not relevant, not relevant to Amazon.

Leah: [00:01:56] And we see that again, this is a conversation that we have a lot, anything in your catalog on Amazon, Amazon holds you responsible for. It doesn’t matter if you haven’t sold any. It doesn’t matter if you created the listing or somebody else created the listing. It doesn’t matter if you haven’t sold any for years. If it’s in your catalog in seller central, Amazon can and will hold you responsible for that listing.

Chris: [00:02:21] We’re not saying stop drop shipping. There’s a drop shipping policy. Some sellers are following it. This is different from violations of the drop shipping policy, where the paperwork doesn’t show you as the seller of record. We can include a link to the drop shipping policy as part of this episode, but that’s not what this is about. This is Amazon’s anti-counterfeit measures, which as you know, they’re facing a lot of heat from the government, from the media, from the public about counterfeits, still being sold on the site. This is their means of reducing the likelihood that counterfeits will be sold. Well, how do they verify things? They want to know about your supplier, they want to see a link to their website. And Leah, it’s something that we’re still amazed that we still know sellers who are buying from somebody who don’t like that business doesn’t have a website. It doesn’t have a URL.

Leah: [00:03:04] It’s one of those weird things, right? Where wholesale suppliers really have not caught up to the whole, you need a website thing. Even large , reputable supplier is really don’t have a great online presence because, historically they’ve never needed it. So that’s, that can be a bit of a catch 22 when you are sourcing supplier, but they just don’t have a website.

Chris: [00:03:26] It is, but you have to make sure that they get one or you have to stop sourcing from them. Sometimes sellers come to us, looking to us for answers. Well, my supplier doesn’t have a website. What can you do to help me? What’s my answer? Stop buying from them.  Maybe that’ll teach them to build a website. I don’t know what else to say if they don’t care.  If the wholesaler doesn’t care, if they lose you as a customer or not, then fine, they can stay on there without a website and you can stop buying from them. And so will every other smart Amazon seller, maybe that’ll do the trick.

Leah: [00:03:52] There are different kinds of drop shipping. The ones that we’re seeing people get into trouble with is kind of the unofficial drop shipping, where you’re defying for something from somebody else. They don’t necessarily know who you are or what you’re doing with that product, and then you’re selling it on Amazon. So you have no relationship really with the supplier, you have no relationship with the brand of the product that you’re selling, and therefore you have no documentation to show Amazon. The other sourcing, the other version of drop shipping, is what I refer to as official drop-shipping or you have a relationship with the manufacturer or the brand. You have agreements in place where , they will fulfill the orders from their inventory and you don’t have to hold inventory. And in that case, you have that relationship. You have that documentation, and it’s not a problem. There are most large platforms online, do use drop shipping. If you sell your products to Dick’s Sporting Goods or Staples, or, a lot of the big box stores who now have an online presence, they’re having the manufacturers drop ship directly to them, but there is a lot of documentation in place and it is a very official relationship that you’re entering into in those cases.

Chris: [00:05:06] Exactly. And it’s not just a request for invoices so much anymore. It’s three things. They want to see a letter of authorization too. More and more. They want to see the invoices, which these types of drop shippers don’t have. There’s no LOA that those dropshippers will have. And also they won’t have a link to a supplier website if they don’t even know where the source to get the order.

Leah: [00:05:26] Or a contact.

Chris: [00:05:27] A contact. They don’t have a phone number. Three things. That if you want to kind of for risk assessment, make sure you’re covered. You need all of those three things at this point. Amazon squeezing resellers, Amazon’s paying much more attention to where people source product. So if you don’t have those three things and you expect to write a magical POA to work your way out of it, the best way to get reinstated from an account suspension is to tell them that you’re not drop-shipping anymore, and that you will have these things going forward.

Leah: [00:05:54] And here is my new supplier and the new invoices.  New products that I will be selling this way.

Chris: [00:05:59] Every week we’re taking on new clients, but we have to have that very direct frank conversation with them. Get to the point of tell them, get their attention by saying you’re not drop-shipping anymore. You’ve sworn it off. Whether or not you’ve got wholesalers lined up, you can go out and get some and buy from them, at least one order.

Leah: [00:06:17] Or again, like I said, an official dropshipping relationship where you have a relationship with them.

Chris: [00:06:22] Or you’re buying from an authorized distributor who can present something like a letter of authorization from the brand. There’s a lot that you need to show now that you weren’t asked to show in 2018 or 2019. So Leah and I just want to make it very clear today, that whatever you’ve seen on YouTube or some class or guru that you follow, they tend to leave this part conveniently out. This part makes the difference between a suspension and a reinstatement. So of course we’re emphasizing it.

Leah: [00:06:48] And  there’s the click baity conversations of drop shipping is dead. And we’re certainly not saying that. I know there are thousands if not tens of thousands of sellers who are making money using this model, all we’re saying is that it is a risky model. And if you don’t have the documentation that Amazon asks for, there is not really a lot you can do to appeal. More and more we’re seeing Amazon basing their decisions on documentation. So saying I don’t have it is not going to get you-

Chris: [00:07:20] They just reject it, or they keep sending you that auto-generated looking email that says greater detail, greater detail. We need more details on this and that. And that’s just their way of rejecting you. I know it seems like, well, we just need more information. That’s a rejection. That’s what a lot of sellers don’t understand. We’re probably going to do an entirely different episode on why do they keep sending this? We need greater details from your message. Because it is a rejection and a lot of sellers don’t understand that, but supply chain documentation,  you need it as a reseller on Amazon. Assuming you need it from now way into the future. Because from Amazon’s perspective, a lot of resellers that get suspended that don’t get reinstated, they think you’re replaceable and they think somebody else will just pick up your slack. And so whatever brand that you’re selling. So they’re not really losing anything there.

Leah: [00:08:06] I think , if you’re looking in terms of how risky is my sourcing model, you really need to look at levels of separation from the brand owner. If you’re the brand owner, congratulations, you have the least risky model on Amazon. If you have a direct relationship with the brand owner, that would be your next best option. The further away you get from the owner of the brand, the more risky your sourcing model is. 

Chris: [00:08:34] And in the past we had conversations about retail arbitrage. For the same reason, you couldn’t be further from the brand if you’re doing arbitrage. And then everyone gets defensive or the psychology there says, well, there’s so many sellers doing retail arbitrage. Why can’t I do that then?

Leah: [00:08:48] We’re not saying that it’s dead. We’re just saying it’s extremely risky.

Chris: [00:08:53] Well, and those types of sourcing are slowly getting grinded off the platform. It’s just gradual. No one says there’s going to be a switch that they,  from on to off where everyone gets suspended in the same day, that’s never going to happen. We understand that. This is a potentially controversial or complex topic from some angles. Any questions you have on it, feel free to reach out to me or to Leah, and e-commerce chris.com is the best place to find us.  Just make sure you fact check this stuff and double check what you’re doing in terms of sourcing, because anti-counterfeiting is an extreme , is a big goal in Amazon. They’re extremely focused on this and they’re tired of criticism from the public about counterfeit items being sold on the site. That’s why they’re doing this.

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