Amazon has revolutionized the e-commerce industry, providing a solid platform for many entrepreneurs. It has become more than just an online marketplace (where you can virtually purchase anything). Instead, it is now a platform where you can sell even without inventory.
Yes, you read that right!
Selling on Amazon without inventory is now possible through different strategies – Amazon FBA, FBM, 3PL, Dropshipping, and Digital Products. Just imagine the freedom of running your online business without the hassles of warehousing, packing, and shipping!
In this article, we’ll continue to discuss how to sell on Amazon without inventory, using strategies to build a profitable business venture.
Key Takeaways from this Post
Selling on Amazon Without Inventory - Is It Possible?
Yes, selling on Amazon without inventory is possible through dropshipping or Fulfillment by Amazon (FBA).
Traditional selling involves sellers managing their own inventory, where you would have to purchase products in advance, store them, and list them for sale on Amazon.
On the other hand, selling on Amazon without inventory will eliminate the tedious purchasing, storage, and shipping process. Instead, you can either utilize dropshipping to eliminate the need for inventory or Amazon FBA and let them handle inventory and logistics.
Benefits of Selling Without Inventory
The innovative approach of selling without inventory on Amazon reshapes the traditional retail model. Below, we’ll share most of the benefits you can get from selling on Amazon without inventory:
- Low Initial Investment: You won’t need a lot of capital investment since you won’t have to go through purchasing and stockpiling inventory. You can then allocate your capital to other strategic areas such as marketing, brand building, and lead generation.
- Reduced Overhead Costs: Unlike traditional selling, where you’ll need to rent a warehouse space and purchase packing materials, selling without inventory allows you to operate significantly with less overhead costs.
- Lower Risks: Selling without inventory offers a low financial risk since you’re not purchasing products until they’re sold, specifically with dropshipping.
- Scalability and Flexibility: As your business grows, you can quickly expand your product catalog without the constraints of physical storage space. Such flexibility empowers you to adapt to market trends and capitalize on new opportunities rather than worrying about overhead costs and capital investment.
- Save Time: Rather than managing shipping and logistics, the opportunity to sell without inventory gives you time to focus on marketing and customer service.
Understanding Fulfillment by Amazon (FBA)
Fulfillment by Amazon (FBA) is just one of the few methods you can use to sell on Amazon without inventory. The FBA is a service handled directly by Amazon, which acts as your full-service logistic partner.
We’ll discuss how it works in more detail below.
What is Amazon FBA?
Amazon FBA is a popular option among many sellers on the platform since it is a complete logistics service provided by Amazon, where they handle product storage, packaging, and shipping.
How does FBA work?
When you decide to sell without inventory and use the Amazon FBA, the first and only thing you have to worry about is sending your products to Amazon’s fulfillment centers.
Reading from the UK? Learn how to send products to Amazon FBA in the UK.
Amazon FBA Pros and Cons
Delegating logistics to Amazon FBA gives you more time and provides resources as a seller to strategize for your business growth. It simplifies the logistics of selling and enhances the overall customer experience.
Pros of Amazon FBA:
- Ease of Use: Amazon designed the FBA simply, making the interface allow you to easily list products, manage inventory, and track sales, enabling you to use the platform efficiently.
- Convenience: Amazon will handle everything, from storage to shipping, allowing you to focus on your product line, marketing strategy, and sales management.
- 24/7 Customer Service Management: The Amazon FBA has a 24/7 customer service management that handles inquiries, returns, and refunds on your behalf. You can utilize this service for free and leave the worries to Amazon.
- Subsidized Shipping Fees: You will be given discounted shipping rates through programs like Fulfillment by Amazon, allowing you to offer customers competitive shipping options.
- Shipping Standardization: Amazon is also committed to delivering a consistent and reliable shopping experience, so they have shipping policies and fulfillment standards to ensure products are shipped promptly.
- Multi-Channel Fulfillment: Sellers can also use Amazon FBA when products are sold on other channels, not just the Amazon marketplace.
Cons of Amazon FBA:
- Costly Fees: While it is true that Amazon FBA offers convenience, it comes at a cost since you need to pay fees for storage, order fulfillment, and other services.
- Precise Product Guidelines: Amazon FBA has stringent product guidelines that you must adhere to, and meeting these guidelines can be a challenge for sellers. Such policies require careful attention since non-compliance can result in additional fees or even the removal of products.
- Product Handling: Sometimes, inventory can get lost or damaged in the fulfillment process, and oftentimes, the error is on the logistics handling of Amazon. We recommend keeping records of the shipments to keep track of inventory.
Exploring Amazon's Fulfillment by Merchant (FBM)
For Amazon’s Fulfilled by Merchant (FBM), you are responsible for delivering your products to customers who buy from you. The FBM is better known as the traditional way of selling and is usually combined with third-party logistics.
What is FMB?
Also called Merchant Fulfilled Network (MFN), the Amazon FBM is an alternative to the Fulfillment by Amazon. In this strategy, the entire fulfillment process is in-house, so you must be in charge of your own inventory. For this method, you can ship your products on your own (through couriers) or let a third-party logistics handle it.
Amazon FMB Pros and Cons
Just like with Amazon’s FBA, there are also advantages and disadvantages to using FBM.
Pros of Amazon FMB:
- Lower fees: Using the FBM when selling on Amazon has the potential for lower fees compared to FBA. You can avoid paying fulfillment fees or use it for other logistic costs.
- Greater control over fulfillment: FBM will grant you complete control over the fulfillment process. It will benefit you if your business focuses on unique or customized products that may not align with the standardized processes of Amazon FBA.
- Control with Branding: You can include personalized branding materials in your package since you will handle the fulfillment process yourself. These may include packing slips, promotional inserts, or branded packaging.
Cons of Amazon FBM:
- Increased Marketing Costs: One drawback of using the Fulfillment by Merchant (FBM) is that you may need to invest more in marketing efforts to attract customers. You will also need to fulfill sales and account management, which can be done by integrating Amazon into Quickbooks.
- Sole Responsibility for Logistics: Unlike with FBA, you must work on the entire logistics, including managing inventory, packing orders, and coordinating shipments. You will also need your own storage facilities or work with third-party logistics.
- Time-Consuming: Using FBM significantly demands a lot of your time if you are growing your business. You will have to juggle working on logistics, marketing, and customer services.
Using a Third-Party Logistics Company For Fulfillment
If you decide to use Fulfillment by Merchant (FBM), you can also integrate this by partnering with third-party logistics (3PL).
A 3PL provides services and solutions for sellers like you who want to outsource certain aspects of inventory management and fulfillment operations.
What is a third-party logistics company?
FBA and Amazon Multi-Channel Fulfillment (MCF) are third-party logistics. Third-party logistics is an outsourced provider that offers order fulfillment for any online sales platform, regardless of whether the business is on Amazon or not.
A third-party logistics provider handles aspects of the supply chain, including inventory management, storage, fulfillment services, shipping, and return logistics.
How to choose the right company for your business
Seeking a 3PL that is right for your business is a crucial decision since this is a significant investment that can take months to implement.
To be able to choose the right company as your third-party logistics company, consider doing the following:
- Research about their brand image and customer relations.
- Ask the companies the right questions, including their services, expertise, and specialties.
- Consider the company’s reliability, handling terms, inventory management, and scope of services.
- Evaluate the company’s scalability and stability.
- Reach out to fellow business owners who have experience working with 3PL companies.
Doing in-depth research on 3PL companies will help save you significant time, money, and effort later.
Leverage Dropshipping to Sell on Amazon
If you are an entrepreneur who wants to jump-start your e-commerce business and want to know how to sell on Amazon without buying products, dropshipping might be a good choice.
What is dropshipping?
Dropshipping is an e-commerce solution available on Amazon (and other online marketplaces) that lets you focus on marketing and promotion while a third party handles the fulfillment process.
You won’t need to buy products and store them in your office or warehouse when working with dropshipping. Instead, you will only list the item you intend to sell and then purchase it from a third-party company once someone buys it.
The item will then be shipped directly to the customer without you handing the product itself.
Looking to learn more - visit our guide on dropshipping accounting software.
Is dropshipping worth it?
The worth of doing dropshipping on Amazon depends on various factors — products, business model, and target market. The method can be advantageous for those seeking a low-risk entry into e-commerce since it eliminates the need for inventory management and upfront capital investment.
However, dropshipping also comes with some challenges, like lower profit margins and potential issues with product quality and shipping times.
How to find reliable suppliers for dropshipping
After learning how to become an Amazon seller without inventory, you should also come up with a few lists of reliable dropshipping suppliers.
To find reliable suppliers for dropshipping, here are a few things you can consider doing:
- Research with Due Diligence: You should thoroughly research each potential supplier and look for reviews, testimonials, and feedback about them.
- Establish Clear Communication: Talk openly with potential suppliers and ask about their processes, product quality, and shipping times.
- Order Sample Products: Before committing to a long-term partnership, consider placing a sample order to evaluate their products' quality and the fulfillment process's efficiency.
- Use Dropshipping Platforms: Dropshipping platforms often have a selection of verified suppliers, making it easier to find trustworthy partners. Use these platforms to vet and connect with other sellers while looking for a supplier.
Selling Digital Products on Amazon
Do you want to know how to sell on Amazon without buying products? There is no better way than learning about digital products.
Selling digital products on Amazon has become a new market trend, especially for many content creators. You won’t need much capital investment to start and would only need excellent artistic and marketing strategies.
Types of digital products that can be sold on Amazon
Amazon offers many avenues for aspiring entrepreneurs, allowing you to make money with digital products. A few of the digital products that you can sell on Amazon are:
- Graphics and Digital Art
- Video Games
- Stock Photography
- Audio Files
- Digital Courses
- Downloadable Prints
Fulfillment and delivery process for digital products
Amazon Digital Services is the one that takes care of the digital product delivery in the platform. They are Amazon’s division that delivers internal products like Amazon Drive, Amazon Prime Video, and Amazon Music.
Depending on which type of digital product you are selling, you must sign up for a few different accounts. For example, if you plan to sell an eBook, you must have a KDP account.
Once you’ve signed up for an account, the next step is to submit your digital product and launch it for selling. Amazon will then be left responsible for distributing them when someone purchases them.
Comparing Different Strategies
Throughout the article, we’ve discussed different methods and strategies for selling things on Amazon without inventory. You can choose from – Fulfillment by Amazon (FBA), drop shipping, or digital product selling.
To help you choose the right one for your business, let us discuss and compare them with a few important points below.
Factors to consider when choosing a strategy
Choosing the right e-commerce strategy is an important decision to make. This is why you must consider the factors below when selecting a strategy for your business.
- Amazon FBA: This e-commerce solution requires you to pay fulfillment fees to cover shipping, storage, and logistics. Make sure you can cover these fees and still earn profit.
- Dropshipping: Working with dropshipping typically has a lower initial cost since you won’t have to purchase items before selling them.
- Third-Party Logistics: Compared to the first two, you’ll need to pay for the products and hire another company to do the logistics and fulfillment, costing you a considerable chunk of capital investment.
- Digital Product Selling: Selling digital products costs the least since you’ll only need to invest time, effort, and talent to sell them.
- Amazon FBA: Suitable items for Amazon FBA can be stored for a long time in a warehouse that does not need special care.
- Dropshipping: If you want to sell items that do not require customization or too much quality checking, dropshipping is a good e-commerce strategy.
- Third-Party Logistics: You can sell anything you’d want to, as long as Amazon and your chosen 3PL allow you to ship one.
- Digital Product Selling: These are just virtual content such as e-books, audio files, graphics, and more.
- Amazon FBA: Since Amazon will be handling the logistics, you will have more time to do marketing and expand your product inventory (to be sent to fulfillment centers).
- Dropshipping: When partnering with dropshipping suppliers, you can allot your time to expand your network and marketing. You can also save time with accounting since you can easily integrate Amazon into Xero.
- Third-Party Logistics: Ample time is needed from choosing products, listing them, and sending them to a third-party logistics company.
- Digital Product Seling: You’ll need quite a lot of time preparing digital products, especially if you are the content creator. Time is the real investment when it comes to digital product selling.
Pros and cons of each strategy
The three strategies we’ve mentioned earlier have unique advantages and disadvantages. Let’s discuss them below.
- Amazon will handle logistics, including storing, packing, and shipping.
- Amazon offers customer service that is available 24/7.
- You will have access to a vast customer base, even as a start-up business owner.
- Amazon FBA will cost you a higher amount of money to cover logistics.
- You will have less control over shipping and fulfillment.
- You might have a hard time following Amazon’s strict Shipping Policies.
- Potential issues about Amazon product handling.
- You won’t need a huge capital investment; only minimal financial risk exists.
- There’s no need for inventory management or warehousing for dropshipping.
- Dropshipping suppliers offer many products you can easily choose from without purchasing in bulk.
- There will be a high chance that you will have a lot of similar products with other sellers.
- You might stay dependent on third-party suppliers.
- Quality control would not be possible on your end, and you might encounter a lot of returns.
- You have no control over shipping time issues.
Third-Party Logistics Company
- Third-Party Logistics Companies often specialize in supply chain management, bringing expertise to your fulfillment process.
- You can quickly be assured of a streamlined operation and process.
- Outsourcing logistics takes a lot of time, money, and effort. You must research, pay for their services, and communicate with them almost every shipping day.
- There is no fixed or standard amount of shipping fees.
Digital Product Selling
- There is a possibility of high scalability with minimal overhead when selling digital products.
- You do not need physical inventory, so there will be no shipping concerns.
- You have greater control over branding and product creation.
- Limited digital goods to sell, especially if you only have expertise in a few products.
- Digital product selling requires considerable marketing to build a customer base.
- There is a possibility of piracy or unauthorized distribution.
Choosing the right e-commerce strategy depends on your business goal, resources, and preferences. Evaluate the above factors to align your strategy with your business vision and objectives carefully.
Best Practices for Selling on Amazon Without Inventory
Knowing how to sell on Amazon without inventory has been a popular choice for many e-commerce business owners. However, this does not mean it’s easy to work with.
To ensure that you have a successful venture using this approach, we’ll share some of the best practices when selling without inventory on Amazon.
Detailed product research and niche selection
Market trends change over time, so it’s essential to understand customer preferences, competition, and market demand when choosing products to sell.
After creating a list of items, evaluate their profitability and consider the costs if you sell them. Don’t forget to associate the fees you will be paying with the chosen fulfillment strategy.
Of course, it’s also essential that the niche you choose aligns with your expertise.
Product listing optimization
Search Engine Optimization (SEO) is essential for being visible online. Learn basic keyword research and use relevant ones when listing your products.
You should also study and understand Amazon’s search algorithm to incorporate high-ranking keywords naturally. Doing this will increase the chance of your visibility on Amazon.
Customer service and returns
If you decide to sell on Amazon using strategies like drop shipping, you should work on customer service relations. Provide clear and timely communication and promptly address their inquiries, concerns, and feedback.
Ensuring that your products meet quality standards is essential to minimize the likelihood of returns. Communicate this with your suppliers to enhance the overall customer experience.
Monitor performance metrics
It’s essential to regularly track sales and revenue, even though you don’t have inventory. It will help identify the overall performance of your business and let you know about the top-performing products in your shop.
You can utilize Amazon’s Seller Central dashboard to track and monitor key performance metrics. Link My Books also offers an available service where you can easily integrate Amazon to Xero or Quickbooks for easy bookkeeping management.
Tips for Success and the Next Steps
After learning more about the ins and outs of selling on Amazon without inventory, you shouldn’t depend too much on third-party companies regarding your business.
Here are some tips for the success of your e-commerce business.
Continuous learning and studying Amazon's policies
Amazon’s policies and algorithms are not safe from frequent changes and updates. It’s essential to continuously learn and study their policies and guidelines to ensure you do not violate them, which might cost you a lot of time and money.
You can review their terms and conditions, attend webinars, talk to fellow Amazon sellers, or participate in relevant forums and groups. Furthermore, be agile with these updates to keep your business in good standing.
Scaling your business and diversifying product offerings
Have a regular assessment of your current business performance to identify growth opportunities. Start by exploring new product categories that are trending and with high demand.
Study the need for these products, and consider adding them to your listings. It’s also important to continuously optimize product listing using software tools and data analytics to identify top-performing products on Amazon.
Optimize Your Bookkeeping Software with Link My Books
Avoid the hassle of manually managing your revenue and sales on Amazon. Instead, you can use Link My Books to streamline your financial management.
When you automate your bookkeeping with Link My Books, you can benefit from the following:
- Have real-time posting and insights into your Amazon sales, fees, and profits.
- Avoid the hassle of complying with tax regulations by leveraging the features of Link My Books.
- Automated reconciliation of bookkeeping and accounting transactions.
Frequently Asked Questions (FAQs)
Below, we will be answering some of the most frequently asked questions about how to sell on Amazon without inventory.
Can I start selling on Amazon without any upfront investment?
Yes, you can sell on Amazon without any upfront investment through dropshipping. Dropshipping is a popular Amazon strategy where you will only list products on your shop but do not need to purchase or hold any inventory.
What are the risks of selling on Amazon without inventory?
Selling on Amazon without holding inventory is risky regarding quality control issues and shipping fulfillment. Since you don’t have the chance to inspect or handle the products you offer physically, there might be inconsistencies with product quality and the efficiency of shipping on time.
Can I sell on Amazon without a business?
You don’t need to be a registered business to sell on Amazon. The platform does not require its sellers to have any kind of business registration when setting up an account. You can quickly start an online shop on Amazon under your name as the sole owner.
Can I sell on Amazon for free?
An individual account on Amazon is free to create, which is a suitable option for those who want to sell only a limited number of items. However, once you start selling products, you must pay a commission for every sale. There is also an option to upgrade to a Professional Seller Account that will ask for a monthly subscription fee.
Selling on Amazon without Inventory is a viable option for entrepreneurs who are either beginners or those looking to minimize their starting investments and instead focus on marketing and account management.
The strategies discussed in this article can lessen your logistics burden and let you focus on marketing and financial management.
Make sure you have efficient bookkeeping since it is also paramount for the success of your business. Explore our features, including Amazon integration to Xero or Quickbooks.
Take the next step and try Link My Books today! Here’s your 14-day free trial.