Inventory Flips

 

By Lesley Hensell

 

Babies R Us advertises a bouncer on Black Friday for a mere $29. On Amazon, it’s selling for $98. It’s an amazing flip.

Your local store is out of inventory, but there is plenty available on the Babies R Us web site. Just create an Amazon MFN listing, and have Babies R Us send the product to your buyer, right?

Wrong. The temptation may be tremendous. But don’t turn your Black Friday into a bust with dangerous drop-shipping.

Does Amazon allow drop-shipping?

First, let’s clarify what drop-shipping means. Drop-shipping is a fulfillment method where a third-party seller never sees nor touches the inventory. The third-party seller accepts an order from a customer, and then it triggers another company to fulfill the order.

Amazon allows certain kinds of drop-shipping. A third-party seller can establish a relationship with a vendor such as a manufacturer or distributor. That manufacturer or distributor can then drop-ship on behalf of the third-party seller. Amazon is totally cool with this arrangement, but only if your shipping statistics remain in the green.

There is another kind of drop-shipping that is specifically prohibited by Amazon. It’s called casual drop-shipping. Meaning, no real vendor relationship exists between the third-party seller and the shipper.

Consider the Babies R Us situation above. To fulfill that order, a third-party Amazon seller would put their buyer’s name in the “ship to” section of an order on the Babies R Us web site. The item would ship from the Babies R Us warehouse directly to the end-buyer.

Why informal drop-shipping can be dangerous:

1. The item arrives in a Babies R Us box. Or it comes in a box from Target, Walmart or another retailer that competes with Amazon. This makes customers unhappy.
2. The item typically includes an invoice with the actual price paid to Babies R Us. This makes customers angry, since they probably paid between two and four times that amount.
3. The seller has absolutely no way of controlling product quality. Amazon expects you to ensure that the items you sell meet its stringent product quality standards. If you never see the inventory and have no formal relationship with the vendor, you have no say in quality.
4. Larger items are often shipped without an outer carton. Shipping stickers are placed directly on the box, which is beaten up by the time it arrives. This does not live up to Amazon’s standards for third-party sellers.

What about doing drop-shipping the right way?

Drop-shipping with formal vendor arrangements can be an excellent sourcing method for some sellers. But just like anything else, it requires careful management and monitoring:

1. Have a discussion with your vendor about product quality. Ensure they are only sending your customers items in gift-giving condition.
2. Find out about your vendor’s packing protocols. If items need to be in a box, make sure they aren’t being shipped out in a padded envelope.
3. Establish rules for fulfillment times. Carefully monitor your orders and make sure they are going out on time- every time.
4. Require timely uploading of tracking numbers for each and every shipment.
5. Whenever possible, automate the entire process, from order transmission to tracking number upload. This greatly reduces human error.

Have questions about establishing a successful drop-shipping relationship? Call on Riverbend Consulting.

image credit: eranicle/Shutterstock