Private Label + Dropshipping – NEW Way Of Selling On Amazon

by Damir Šerbečić
eCommerce Selling on Amazon

You know that I DON’T recommend dropshipping on Amazon and that I am a BIG proponent of product differentiation.

If you don’t know what dropshipping is, it’s a form of selling where you don’t hold any inventory. Once you make a sale and collect money from a customer, you order the product that you sold from your supplier and tell them to ship it directly to your customer. Margins are usually low (less than 20%).

The beauty of dropshipping is that you don’t hold any inventory.

I don’t recommend dropshipping on Amazon, because it’s hard to find reliable suppliers. If a supplier sends a wrong product or misses the shipping date, then your selling account might get suspended.

The downside is that you are not building a brand (asset) and it’s almost impossible to differentiate.

Private labeling, on the other hand, is all about making an inventory investment in order to have a custom branded product. Margins are much higher compared to drop shipping (up to 50% in some cases). The downside is obvious, you need to make an investment before you can have any sales.

Finally, there is a solution to combine the best of both worlds!

Differentiation potential, ZERO investment, high margins and ease of starting. Dropshipping of private label products is here!

Introducing ThePrintful + Amazon integration.

What is ThePrintful?

ThePrintful is an on-demand t-shirt printing company.

Recently they have expanded product selection to include mugs, hats, socks, totes, leggings, phone cases and much more. Take a look at full list of products.

Originally they focused on dropshipping custom t-shirts for eCommerce websites. Basically, you would design a t-shirt, connect your eCommerce store with ThePrintful platform and you are all set.

Once sales occur and you have collected the money from a customer, ThePrintful gets automatically notified and gets to work. Everything is automatized!

The same goes for ThePrintful + Amazon integration.

One of my eCommerce sites uses ThePrintful service to sell t-shirts and hats. A pretty automated system where I don’t have to do anything. Literally! Except to promote the website.

How does it work?

The process of integration is pretty straightforward:

  1. Sign up for a Professional seller account (you probably already have one)
  2. Get approved for selling Apparel
  3. Register your brand through Brand registry program
  4. Register with Amazon Marketplace Web Service (MWS)
  5. Connect your Amazon seller account with Printful using MWS

IMPORTANT: Keep in mind that with Amazon you can have only 1 seller account. If you are opening an account for the first time then go ahead and open it. However, if you already have an Amazon seller account then use that one. Never open any additional seller account without written permission from Amazon.

Once you have connected ThePrintful with Amazon it’s time to design and upload some products:

  1. Design your t-shirt or any product type that ThePrintful offers, by following their design tutorials
  2. Sync the products with Amazon using product push generator

Once a sale occurs they print and ship your Amazon orders automatically.

It takes about 2-7 business days to create apparel products (t-shirts etc.) and 2-5 business days for non-apparel (posters etc.) products. Then you should add shipping times on top of that. 97.66% of orders are shipped within 5 business days. More than half of the orders are shipped within 3 business days or less.

You can learn more about ThePrintful shipping options here, so you can know which shipping options to offer to your Amazon customers.

Keep in mind that obviously you won’t be using the Amazon FBA program. This is because printing is done once a sale occurs. The product is sent directly from ThePrintful printing factory to your customer. You will use Fulfilled By Merchant (FBM).

How do I calculate profit margins?

Go to this page and select a product which you are interested in selling.

Click on the Retail prices tab and you will get a list of product prices. This doesn’t include shipping.

If you were to sell on your own eCommerce store then all of the displayed profit would go in your pocket. However, since you are selling on Amazon marketplace you need to include referral fees, which are in most cases 15% of the selling price.

For example here are the prices for t-shirts.

eCommerce vs. Amazon Profit Margin Comparison

Here is an example of how much profit you would make if you were to sell this particular t-shirt on Amazon vs. your own eCommerce store.

Amazon:

  • Selling price: 22$
  • Marketplace fee: 3.3$ (15%)
  • Transaction fee: 0
  • Cost of goods: 13$
  • PROFIT: 5.7$
  • Profit margin: 25.90%

eCommerce store: 

  • Selling price: 22$
  • Marketplace fee: 0
  • Transaction fee: 2.9% + 0.3$ = 0.94$
  • Cost of goods: 13$
  • PROFIT: 8.06$ 
  • Profit margin:  36.6%

Shipping fees are not included, because in case of FBM (fulfilled by merchant) customer pays for the shipping. Shipping rates that you can use are available on Printful’s website (this is the shipping cost from Printful facilities to a customer in the US)

*Transaction will defer based on the payment processor you use to receive payments. I used PayPal as an example. 

Keep in mind that advertising fees and taxes are not included in the calculation. Deduct advertising fees and taxes from the profit amount in order to get a more accurate profit amount, as I like to say “the amount that goes in your pocket”!

But isn’t it better to use Merch by Amazon?

Merch by Amazon is a totally different platform with a different purpose. Merch has been launched with the intention to offer an ability to monetize audiences off of Amazon.

For example, if you have an app you could monetize it with in-app purchases by offering Merch by Amazon t-shirts to your audience.

However, since the Amazon marketplace is huge, a lot of sellers made steady revenue streams by selling solely on Amazon, without any audiences off of Amazon.

Although there are some strong similarities, and both ThePrintful and Merch products are sold in the same marketplace, there are advantages and disadvantages to both.

Advantages of Merch by Amazon: 

  • No shipping or customer service hassles
  • Set and forget system (unless you want to promote your products off of Amazon)
  • No suppliers
  • Easy to design and upload
  • High-profit margins compared to work involved
  • Separated from seller account

Disadvantages of Merch by Amazon:

  • Can’t upload additional product images
  • No traffic statistics
  • Limited design possibilities
  • T-shirts only (ThePrintful has much more product types)
  • Low-quality t-shirts
  • Not your brand (you are just riding on demand trends)
  • Limits to the number of the design you can have

Downsides and risks

This way of selling is pretty new, so there are not many hero stories yet. However, I believe this is going to create some millionaires in the upcoming years.

Although everything sounds like a fairy tale, there are some downsides and potential risks.

  • Shipping and printing delays might pull your account performance down and potentially get your suspended
  • Refunds are a MAJOR hassle: customer returns either go to your address or to ThePrintful. Learn more about returns here.
  • No shipping advantages to Prime members
  • You have to order a t-shirt sample in order to take custom photos

Have you used ThrPrintful? What is your experience?

I am curious, let me know in the comments below!


Who is Damir Šerbečić?

 

Founder of digital marketing agency and educational platform WinWinAcademy. On this blog, I document and share tested marketing approaches to help you launch and scale a predictable, profitable and location independent eCommerce business.