How to 3PLs Allow Cheaper Amazon Sales Without Inventory
As an ecommerce business owner, managing inventory can be both a time-consuming and a costly task. It's not only about ensuring you always have enough stock to meet customer demand, but also about the storage space required, keeping track of stock levels, and dealing with any surplus or outdated stock. These challenges often drive ecommerce businesses to explore options that require minimal to no inventory management (we see you over there wondering how to sell on Amazon without inventory), allowing them to focus more on growing their sales and expanding their market reach.
This is precisely where selling on Amazon enters the picture. Amazon's vast customer base and unrivaled reach present an attractive proposition. Branching into Amazon not only increases your product visibility but also opens the door to millions of potential customers globally. But how do you leverage this gigantic platform without having to deal with the hassle of inventory management? Let's delve into that.
How to Sell on Amazon Without Inventory
If you're looking to crack the puzzle of how to sell on Amazon without inventory to change your business model, you have several options. You can sell on Amazon without holding stock in four main ways. These include dropshipping, Merch by Amazon or print-on-demand, selling through the Kindle store, and selling digital products. Let's unpack each of these methods.
Dropshipping is a business model where the seller doesn't stock the items sold. Instead, when a purchase is made, the item is bought from a third party and directly shipped to the customer. This method is compelling due to its low entry cost. However, the downsides include lower profit margins and supplier dependence for inventory management and shipment.
● Low Start-Up Costs: Having no inventory for your Amazon business means not having to spend a significant amount upfront on products.
● Minimal Risk: If you're unable to sell products, you don't end up with a lot of unsold inventory.
● Wide Product Selection: You can offer a broad range of products because you're not limited by what you can store physically.
● Location Independence: You can run your business from any location where there's internet.
● Lower Profit Margin: Since you're essentially acting as a middleman when you sell on Amazon without holding your own inventory, the margin for profit is often quite low.
● Inventory Issues: If your suppliers run out of stock, you can run into issues fulfilling orders. (We'll talk about the importance of reliable suppliers later on.)
● Shipping Complexities: If a customer orders multiple products sourced from different suppliers, shipping and customer service can become complicated.
● Lack of Control Over Quality: Since you never see the product, you can't control the quality, which could impact customer satisfaction.
Merch by Amazon/Print on Demand
Merch by Amazon or print-on-demand allows you to sell custom designs on various products like t-shirts or mugs. We're lumping them together because Merch by Amazon is one provider of print-on-demand services. With this model, you set your design and price, and Amazon or another print-on-demand provider takes care of production and shipping. This method can be profitable with unique designs and marginal upfront costs. However, competition is high, and there's a reliance on Amazon or another third-party service for manufacturing and shipping.
Pros of Print-On-Demand:
● Low Overhead: No need to manage inventory, reducing storage and logistical challenges.
● Wide Product Selection: Allows for creativity and customization, encouraging unique designs. You can make product listings for all of your ideas to attract potential customers since you don't manage inventory.
● Fulfillment Handled: Amazon or another print-on-demand service handles product manufacturing and shipping, simplifying operations.
● Low Upfront Cost: Lower upfront costs as you don't need to invest in inventory beforehand.
Cons of Print-On-Demand:
● Crowded Market: High competition, especially when you sell on Amazon, making it challenging to stand out and capture market share.
● Lack of Control: Reliance on Amazon for production and shipping could create potential risks if there are delays or product quality issues.
● Revenue Complexities: Revenue can be inconsistent, especially in the beginning, depending on the popularity of your designs.
● Little Brand Recognition: Establishing a strong brand presence can be challenging as the market is saturated with similar offerings. This is amplified when you're an Amazon seller because your product listings are alongside thousands of similar items.
Selling through the Kindle Store
Producing eBooks is one of the most natural answers to how to sell on Amazon without inventory. Some Amazon sellers don't know that your written content can be sold on the Kindle Store. This can be profitable for prolific writers with a substantial following. But, the challenge lies in consistently creating high-quality content and generating enough sales to turn a profit.
Pros of Selling on the Kindle Store:
● Large Potential Market: You can reach a large, worldwide audience as Kindle books are available in over 190 countries.
● Control: You retain control over your work’s rights and set your own list prices.
● Solid Margins: You can earn up to 70% royalty on sales to customers in most countries.
● Growth Potential: Through Kindle Direct Publishing, you can easily publish both eBooks and paperback books. If you move into paperback books, you still don't need to purchase inventory.
● Promotion Opportunities: Amazon offers various promotional opportunities for authors, such as Kindle Countdown Deals.
Cons of Selling on the Kindle Store:
● Crowded Market: There can be intense competition as countless authors publish their eBooks on Kindle Store.
● Inconsistent Royalties: High royalty rates only apply to certain price ranges ($2.99 to $9.99). The royalty rate drops to 35% for books priced outside of this range.
● Challenging Visibility: Without proper marketing strategies, it can be challenging to get your book noticed.
● Unique Formatting: Amazon uses a format called MOBI, which is different from the popular eBook format, EPUB.
● Limited Channels: If you choose to participate in Kindle Select (making your eBook exclusive to Kindle store), it limits your reach to other platforms.
Selling Digital Goods
The Kindle store is one type of selling digital products, but it's worth covering your other digital options for how to sell on Amazon without inventory. You can sell digital products like software, digital art, eBooks, and online courses on Amazon with minimal overhead costs. While the profit margins can be high, competition is intense, and marketing the product effectively can be challenging.
Pros of Selling Digital Goods:
● Low Overhead: While selling physical products, overhead expenses like warehousing, shipping or manufacturing are not a concern with digital goods. This helps in boosting your profit margins.
● Ease of Distribution: You can easily distribute your products to customers all over the world without worrying about logistics.
● Scalability: The potential to scale your business is tremendous because you're not tied to physical inventory.
● Instant Delivery: Your customers can download or access your product immediately after purchase, enhancing customer satisfaction.
Cons of Selling Digital Products:
● High Competition: The competition in digital products is quite high, making it hard to stand out.
● Customer Trust: Convincing customers to buy digital products might be challenging. They often prefer physical goods due to trust issues and fear of online fraud.
● Digital Rights Management: Piracy and theft of digital goods are persisting issues. You may need to invest in systems that protect your digital products. Digital art is especially susceptible to this.
● Technical Glitches: There's always a risk of facing technical issues such as website downtime, which could interrupt your sales. (At the very least, make sure you're ready to handle customer inquiries and customer service support needs that could pop up from such an issue.)
A Note for Established Brands
However, if you're trying to figure out how to sell on Amazon without inventory but already an established e-commerce business holding physical inventory, these methods may not be the best fit. They usually suit beginners or those operating on a smaller scale. Physical inventory requires careful management, tracking, and storage, which can become burdensome and expensive if managed in-house.
As your ecommerce business grows, your best strategy may be to shift your inventory management strategy altogether. Moving your inventory out of your office and into a low-cost warehouse can free up valuable space and reduce overhead costs. Teaming up with a third-party logistics (3PL) provider like All Points can streamline your operations, letting them take care of warehousing, packing, and shipping while you focus on scaling your business.
Warehousing vs Holding No Inventory
The primary difference when holding no inventory---either via dropshipping, Print-On-Demand (POD), or any other method compared to warehousing products---is the financial commitment and resource allocation. When you house inventory in a warehouse, you face upfront costs, warehousing fees, and the challenge of managing stock levels. On the flip side, no-inventory methods like dropshipping and POD operate differently.
Dropshipping and Print-On-Demand Costs
With dropshipping, you only purchase a product from your supplier after a customer places an order. The supplier then ships the product directly to your customer. Likewise, with POD, the product is only created and shipped when a customer purchases. Both these methods alleviate the need to predict demand accurately, reduce upfront costs, and eliminate the need for storage space. However, it doesn't necessarily mean they're cheaper in the long run.
The costs of dropshipping and POD include delivery charges, supplier fees, and potentially higher costs per item, depending on your agreement with the supplier. Another aspect to consider is quality control. As you don't handle the products directly, you rely on your supplier's commitment to delivering quality goods to uphold your brand's reputation. Poorly produced products or shipping mishaps could harm your relationship with customers, impacting your long-term prospects (and the reviews associated with your Amazon seller account).
If you're operating with a less-than-responsible producer, there's only so long you can sell on Amazon without triggering some negative customer feedback. Without any control over your final product, your Amazon business hangs in a precarious position, and it'll be a constant challenge to provide excellent customer service.
Adopting the Best Approach
The choice between holding no inventory vs warehousing largely depends on your business structure, product nature, and overall strategy. If the quality is non-negotiable for your brand and you can predict demand reasonably accurately, warehousing might be the better option. But if you're a beginner with limited resources, or you're dealing in non-perishable, easy-to-manufacture items, selling products using dropshipping or POD could be the right way forward.
Considerations for Selling Without Inventory
As an Amazon seller without inventory, it's crucial to be attentive to several factors to ensure success for your Amazon store. Transparency in communication with your customers, for example, is vital. Keeping them informed about product availability, shipping times, and any potential delays aids in setting feasible expectations and nurturing customer satisfaction.
Regular updates, if delays occur, build trust and understanding between you and your customers. It is also worthwhile to have a reliable customer support system to address any concerns, complaints, or customer inquiries promptly. This approach assures customers you're committed to their happiness, even if you are a non-inventory seller.
Beyond customer relations, it's critical to stay up-to-date with Amazon's regulations. Amazon has specific policies in place for sellers who sell products but don't hold their inventory. Violating these guidelines could lead to your Amazon seller account being suspended or, worse, terminated. These policies include ensuring that the third-party shippers you utilize adhere to Amazon’s shipping and delivery time standards. Additionally, it is your responsibility as a seller to address any customer complaints or issues regarding the product.
Selling without inventory also means you must be mindful of returns and refund policies. Since you don't physically handle your own inventory, you'll need to coordinate with your supplier to ensure that returned items are properly managed. Working out these details beforehand can prevent headaches down the line.
Why Warehousing Is Superior to Dropshipping For Amazon Sellers
Undoubtedly, both warehousing and dropshipping have their own unique benefits, but when it comes down to stability, control, and cost-effectiveness, warehousing typically comes out ahead. Here are the reasons why.
One of the greatest advantages of warehousing over dropshipping is the greater level of control it offers you over your inventory. When you run an online store without inventory, you're at the mercy of your dropshipping suppliers. If they run out of inventory, so do you. With no-inventory selling, this can lead to delays, backorders, and disappointed customers. However, with warehousing, you can clearly view your inventory levels and make proactive decisions accordingly.
In dropshipping, shipping costs can be high and unpredictable, as they heavily depend on your supplier's location relative to your customer's delivery address. On the contrary, with warehousing, specifically when partnering with a 3PL with strategically located warehouses, you can often achieve lower shipping costs and faster shipping times since your goods are stored closer to the customer's shipping address.
In a dropshipping model, quality control can be an area of concern as you're not in direct control of the packing and shipping process. Alternatively, you're in charge of these processes in a warehousing setup. Collaboration with a reputable 3PL provider like All Points ensures you can achieve high-quality products and have them reach the customer exactly as described, thus enhancing customer satisfaction and loyalty.
With dropshipping, you're limited in how much you can customize and brand your packaging, which can be a major drawback for businesses looking to create a unique, memorable unboxing experience for their customers. Warehousing, partnered with a quality 3PL, allows more room for custom packaging and branded materials, giving your ecommerce business an extra push in the marketplace. (Here at All Points, for example, we have specialty printing services and custom kitting services to help increase customer satisfaction by providing a wow factor on ecommerce sales.)
In the end, choosing between dropshipping and warehousing depends largely on the specifics of your ecommerce business model and your long-term goals, but for many sellers, the control, reliability, and financial advantages of warehousing make it a superior choice.
How a 3PL Simplifies the Process
Using a 3PL partner like All Points offers a practical and convenient solution for ecommerce businesses, bridging the gap between no-inventory methods and warehousing. With a 3PL, you don't house the inventory yourself, but it's stored in the third-party provider's warehouse. This eliminates in-house management while maintaining control over product quality.
The 3PL takes on tasks such as inventory management, warehousing, packing, and distribution. Essentially, it can save you significant warehousing and inventory management costs, provide scalability during peak seasons, and free your time for other key activities like marketing and customer relationships. Third-party logistics providers like All Points are also experienced enough to take control of your entire fulfillment process so you can focus on other drivers of your business like product research, optimizing product listings, or the marketing side of ecommerce selling.
While a 3PL might cost more than dropshipping or POD on a per-item basis, the improved control over product quality and the overall shopping experience might translate to better customer satisfaction and retention in the long term, leading to greater profitability.
For ecommerce entrepreneurs eyeing Amazon sales without the burden of inventory, leveraging third-party logistics (3PL) like All Points offers a seamless solution. By opting for models like dropshipping or print-on-demand, businesses can dodge the complexities of stock management, yet these methods come with their own set of challenges such as lower margins and dependence on suppliers. However, for those prioritizing control and scalability, partnering with a 3PL for warehousing presents a more robust option, ensuring better inventory management, quality control, and enhanced brand experience, ultimately striking the right balance between operational efficiency and customer satisfaction.