Today we will be looking at the difference between Dropshipping VS Amazon FBA. If you want to make money online, eCommerce is one of your choices. It has proven itself as a profitable and you have a lot of options to choose from. There are two popular eCommerce business models today, which are Dropshipping and Fulfillment by Amazon.
In this post, I will discuss each concept of this eCommerce business, their similarities, and differences. If you are thinking of starting a business and in a dilemma which one to choose I hope this Dropshipping vs Fulfillment by Amazon review will give you an insight on what to choose.
What is Dropshipping?
Dropshipping is a type of eCommerce business where you make a site that you can sell products that you choose from manufacturers. You are the middleman between the buyer and the manufacturer. Your sole responsibility is to process the orders, handles the payment and answer related queries from customers. As for your product’s storage, you don’t need to worry about that as your manufacturer where your products came from is the one responsible for it as well as the shipment of the goods to your customers.
What is Fulfillment by Amazon?
Fulfillment by Amazon is powered by Amazon itself and is catered to a larger audience. It is popular as its company is stable and popular that customers are drawn to it more compared to other eCommerce stores out there.
When you avail of their eCommerce platform, your responsibility is to send your products and properly label them with FBA specific process and they will let it store at their warehouse. You don’t need to worry about packaging, shipping your products as Amazon will do it for you. They even handle customer support as well as returns just make sure you keep tabs on your products in stock.
Courses such as Amazing Selling Machine focus 100% on the Amazon FBA side of things.
Pros of Dropshipping
In Dropshipping you don’t need a physical store to sell products which is a great advantage for a business. This will give you more spending on other things such as marketing campaigns and building up your eCommerce site. In selling products, you are just responsible for placing the order with the supplier or manufacturer that will ship your products and even handles the returns for you.
One thing that makes it stand out is that you are not required to stock up on products and have a huge inventory as it is not your responsibility as it is the suppliers. You don’t have to worry about selling all the products compared if you own all the inventory that doesn’t sell well, it will be a huge loss. Using Dropshipping you’ll be able to sell a variety of products without worrying about the quantity of your stock. It won’t be risky to try a new product.
You will be saving a lot of money, time and energy as you don’t need to deal with the logistics like packing, shipping, looking after inventory. You can even work anywhere as long as you have a good internet connection that will be able for you to communicate well with your customers and supplier.
Cons of Dropshipping
The not so good thing about Dropshipping is it has fewer profit margins. Yes, it doesn’t require much capital but the returns will be less because you are not the one who directly sells the products. You will just get a part of it unless you will manipulate the price of your products and make it a lot more.
Since you don’t get to hold of the item, you don’t know the specifics and you can’t be sure of the quality of the product. It will be difficult to answer details about it if your customer will ask. There could be possible customer issues when it comes to customer support.
You won’t be getting good deals and discounts as you don’t make bulk purchasing and expect there will be a lot of competition that you need to look into if you want this business. You need to be smart with your campaigns and make sure to know your competition.
Pros of Fulfillment by Amazon
One of the benefits of FBA is that you’ll have enough time to focus and scale your business. They take care of all the logistics that are needed like the packaging and shipping process as well as excellent customer support. Because of that, you will be able to focus your time on scaling your business.
Since Amazon is becoming a household name when it comes to eCommerce you won’t have any problems when it comes to branding. You will have the recognition you need that will make you sell more. In that case, since it is popular worldwide you’ll be able to have a larger customer base. It will be quite difficult to reach a huge audience, especially if you are not well known.
When it comes to returns, you don’t need to worry about dealing with it since Amazon will handle it as long as you keep your stocks updated. With these benefits, better expect that you’ll have better profit because you are in good hands with Amazon.
Cons of Fulfillment by Amazon
If there are benefits about FBA, there are also negatives looming about this platform.
Fulfillment by Amazon has a pool of competitors as you won’t be the only one who will take advantage of their brand name so you better be prepared for it. In selling products on Amazon, you also have to be smart as you need to choose one that will sell or you won’t be able to have profit but instead you’ll be paying for stock fees.
Amazon has full control of everything and you can’t do anything if there are sudden changes with their policies or if they remove your store in their platform so you need to know it well so you won’t have any violation.
Since Amazon handles everything especially when it comes to customer service, you won’t be able to contact your customers directly. You don’t own your customer’s information and won’t be able to market to resell products to them.
Lastly, you need capital to start a business with FBA. It is quite expensive, especially their other fees that you need to pay and avail to use their services.
What is the difference between Dropshipping and FBA?
In Dropshipping, you will act as a middle man between suppliers and customers. You are the one who will sort everything when it comes to customer service and supplier transactions. As you don’t own the merchandise, you let the suppliers do the packing and shipping.
While in Amazon’s FBA program, they have complete access to your product from packing, shipping and transaction with customers. The only thing that you can control is your product list and the quality of your product as you can supervise and check it before shipping it to their warehouse.
Dropshipping is more cost-efficient than FBA as you need to pay storage fees to Amazon. This is the major difference between Dropshipping VS Amazon FBA.
What Path you should take?
Dropshipping and FBA are similar when it comes to business as they both sell products online. The difference between them is how they handle logistics and how involved you are in the business. Choosing one to another doesn’t mean it is going to be a certified success as both needs your full attention and hard work.
If you take the Dropshipping path, it would be lesser cost as you could just start an investment of $29 for the eCommerce hosting with your store running in two or three weeks' time. There are a lot of Dropshipping platforms out there and one of the most popular ones is Shopify. Opening a Dropshipping account will help you with your business especially if you are just starting.
If you take the Amazon FBA path, what you will get is an endless of possible customers as they are a popular eCommerce platform and have a very wide audience around the world. It may take some money if you choose this but it is surely a good investment for your business. It won’t guarantee a 100% success but it is possible. You should just learn how to use it wisely and learn a lot of tricks and tips from professionals who know how it works. They are courses out there that can help you build an Amazon business such as the Amazing Selling Machine.
Final Verdict: Dropshipping VS Amazon FBA
It isn’t easy to decide what to choose, especially if you are interested in starting an eCommerce business. It also depends on what you have as a capital, what are you willing to invest and your preference.
If you are just starting, I would suggest that you choose Dropshipping with Shopify because it is simpler and doesn’t require a large investment since you don’t have the product itself and will just let your supplier deal with it.
You also face lesser risks, as you don’t need to have a bulk of products that you need to sell and don’t need to pay fees for storage when your products don’t sell. Also, since you have direct contact with your customer as you handle its support, you’ll be able to resell them your products and other products that you offer.
Dropshipping will be a good choice especially if you are just starting because it is low risk and have low investment needed.
If you want your business to be out there, be known and have the money to invest then you could try Amazon’s FBA. Just a reminder that it is going to be a high-risk move if you choose it as an eCommerce business.
Nothing is easy and sure when it comes to having an eCommerce business. Just also remember that you should be smart of your choices, put in a lot of hard work and make sure to study your chosen path of business.
Now you know the pros and cons of each Dropshipping VS Amazon FBA, let us know what you prefer in the comments.