How can I avoid a Section 3 Amazon drop shipping suspension?
Amazon suspensions related to drop shipping are on the rise.
Drop shipping - which effectively means allowing a third party to fulfil your orders on your behalf - is something that is only allowed by Amazon under a strict set of guidelines. Moving away from these can lead to suspension, which is something that Thompson and Holt has become increasingly aware of.
What is Amazon’s drop shopping policy?
Amazon’s drop shipping policy in full reads as follows:
Drop shipping, or allowing a third-party to fulfill orders to customers on your behalf, is not acceptable unless it is clear to the customer that you are the seller of record. The following examples of drop shipping are policy violations that may result in a restriction of your ability to sell using Amazon’s Merchant Fulfilled Network (MFN):
• Purchasing products from another online retailer and having that retailer ship directly to customers, if the shipment does not identify you as the seller of record or if anyone other than you (including the other online retailer) appears on packing slips, invoices, or external packaging, it is strictly prohibited without exception; or
• Shipping orders with packing slips, invoices, external packaging, or other information indicating a seller name or contact information other than your own is also strictly prohibited.
Any time a customer sees packaging, invoices, or receipts identifying a seller that is not either you or Amazon it creates confusion for the customer about how their order is being fulfilled and whom they should contact with any problems or questions.
If you intend to fulfill orders using a drop shipper, you must always:
• Have an agreement with your supplier that they will identify you (and no one else) as a seller of your products on all packing slips, invoices, external packaging, and other information included or provided in connection with the products;
• Remove any packing slips, invoices, external packaging, or other information identifying a third-party drop shipper prior to shipping the order;
• Be responsible for accepting and processing customer returns of your products; and
Comply with all other terms of your seller agreement and applicable Amazon policies.
Read more about 'FBA v Drop shipping on Amazon'
How can I avoid a drop shipping suspension?
Thompson and Holt managing partner Craig Gedey explains: “Basically by following Amazon’s guidelines exactly. And if at any point you are asked for documentation such as a letter of authorisation then you need to have that to hand.
“Drop shipping used to be much easier on Amazon, before things changed in 2020. That was when Amazon required new drop shippers to provide an invoice from their suppliers, showing that they had permission to sell the product they had listed on the site. This is what is known as a letter of authorisation, and it’s crucial to be able to continue drop shipping on Amazon now.
“Prior to that you could just include a simple receipt, and could drop ship from any number of suppliers around the world with little or no worry. That is no longer the case any more, you have to have permission from the supplier and the accompanying documentation to prove it.
“If you haven’t, and you do invoke a suspension from Amazon, then you need to upload a letter of authorisation from the intellectual owner of the product as quickly as possible to send on. Check who the owner is, it could be the wholesaler, manufacturer or in some cases a middle party allowed to sell on behalf of somebody else.
“But beyond your letter of authorisation, you could also need a resale certificate from your wholesaler or retailer before they allow you to sell your product. You need to check with them before attempting to drop ship their products on Amazon. And sometimes, you need a business license, like an LLC, to get this certificate.
“Amazon doesn’t like drop shipping from retailers, mainly because your product can arrive at the customer’s door in packaging that isn’t either yours or Amazon’s. They would prefer you to use a wholesaler that is approved by them, which you can find a trade shows, on Inventory Source or Worldwide Brands.
“Drop shipping from a wholesaler will inevitably cut down on your profit margins though, compared to retailers. But a smaller profit margin is preferable to an Amazon suspension.
“Another factor to consider is that Amazon and its systems are naturally suspicious of new Sellers, making request for a letter of authorisation much more likely. If you are considering drop shipping from scratch, consider using the FBA model with Amazon for the first six months to establish some trust in your account, although that will require an investment in inventories.
“Grow your account slowly to avoid unwanted attention from Amazon, something that will also allow you to better understand their terms and conditions, as well as basics like order fulfilment and customer service. You are then more likely to be able to drop ship with less attention on your account.”
If you have found yourself suspended while selling on Amazon, contact Thompson and Holt for a free LiveChat to get your Seller business back online as quickly as possible.