Dropshipping and Amazon FBA both changed the way business models work, and both are now often thought of as options for new businesses. You know that your eCommerce business needs a certain strategy, but how do you choose the best one?
To make a good decision and make sure your business is successful and profitable, you need to know the answers to a few important questions.
You want to start an eCommerce business, but you don’t know where to begin. As you plan to grow your current business, the following information will help you decide between dropshipping and Amazon FBA.
How Does Dropshipping Work?
With dropshipping, you can start a business with a small amount of money. Dropshipping suppliers give you the goods that you can then sell. No stock is bought until a sale has been made. When you sell a dropshipped product on your eCommerce store, the dropshipper sends the product directly to your customer. You only have to pay when the product is sent to you.
Warehouses and fulfillment are taken care of by companies that make things or by dropshipping suppliers. Also, you don’t have to pay for stocks right away. You pay for the stock when a customer buys it. You can start small with e-commerce. If you buy in bulk, it will cost you more, so your profit will be less.
What Is Amazon FBA
Amazon’s FBA program can help business owners who sell to a large number of people. It is a great solution for eCommerce businesses because it can grow with them.
Fulfillment by Amazon is a service that will store and ship your products for you. Amazon’s huge market for popular products gives it a unique way to do FBA. These products are eligible for Amazon’s shipping promotion as well as Free Super Saver Shipping and Amazon Prime. This makes FBA even more profitable.
The pros and cons of dropshipping
This online business model has a low risk, but it also has some problems. This is a list of the good and bad things about dropshipping.
PROS:
Little money needed up front
The initial cost is low, and it’s easy to get started. You don’t have to buy inventory or set up a storefront to do dropshipping. The only costs are to set up an online store, order a few samples to find the right supplier, and pay for marketing.
Minimal Risk
The only risk is putting time into marketing a product that doesn’t sell. You won’t have to pay fees to keep hundreds of items in your garage that haven’t sold.
Flexibility
It’s easier to try out new products when you don’t have to buy a lot of them. When you list a lot of different products, you don’t need to keep stock. If something doesn’t sell, it’s easy to get rid of it and try something else.
In traditional e-commerce and Amazon FBA, if you wanted to sell more products, you would have to add to your stock.
a steady flow of passive income
To do well in business, you have to work hard and be dedicated. When your dropshipping store is up and running, you can make money while you sleep.
The supplier will be in charge of the fulfillment. We pack, keep track of inventory, and ship everything for you. If you choose the right supplier, dropshipping can help you make passive income.
More money coming in
Some new businesses fail because they don’t make enough money. When a business owner has a traditional retail store or an online store, he has to buy products before he can sell them. The money is locked up until the goods are sold.
With dropshipping, you don’t have to keep inventory on hand, which is a big plus. Your supplier only gets paid if you sell something, so spending money on marketing will help your business grow.
You can work wherever.
As long as your supplier is taking care of order fulfillment, you can work from anywhere with an internet connection. You can run your store from anywhere if you have a laptop.
CONS:
Profits by Margin
The profit margin for dropshipping is lower than that of other e-commerce businesses. When you buy a lot of products at once, you can get a better price per item and make more money per sale.
With dropshipping, you buy products as orders come in, one at a time. If you become too expensive, you may lose sales. By raising your prices, you can make more money.
There is a lot of competition.
Dropshipping is good because it is easy to get started. But because of this, there is a lot of competition.
In your niche, there will always be dropshipping competitors selling products that are similar to yours. To make money with your business, you need to stand out from the crowd.
Not being in charge
Find a reliable supplier if you want to do dropshipping. Since the products you sell go straight from the supplier to the customer, you don’t have much say over how good they are.
Your brand and the reputation of your store depend on who you buy from. Ordering a sample of a product before putting it in your store will reduce the risk.
A supply chain that isn’t coordinated
If you sell different kinds of goods from different suppliers, your customers’ orders will often come in separate packages. Because of this, the shipping costs for your customers will go up.
Pros and Cons of Amazon FBA
Nine out of ten people who buy things online check Amazon’s prices before they buy. Amazon, which is the biggest name in online shopping, is a good place to sell things online. FBA sellers, on the other hand, face some big problems. Not everyone can use the business model.
The pros and cons of Amazon FBA are listed below.
PROS:
Reach a Lot of People
You can start selling right away on Amazon because it has such a large customer base. A lot of people who might want to buy your products can see them. When dropshipping, you have to build up your customer base from scratch.
More money coming in
With each item you sell, your profit margin will go up. With FBA, you have to buy a lot of products at once, but that lets you get discounts from your suppliers and make more per sale.
Customer Service and Returns Management
Amazon FBA packages, ships them, and takes them back. Because of this, you won’t have to deal with returns or refunds. FBA takes care of all of that for you.
Fast Service
FBA products are shipped for free to Amazon Prime members. Because of this, you won’t have to pay anything extra to get their orders to them quickly. In dropshipping, a lot of the suppliers are in China, and it can take up to 7 days to get an order.
Increase customer trust
People know and trust the Amazon brand. The company sells many trusted products that can be bought online. When you sign up for Amazon’s FBA program, your product listings will show “Fulfilled by Amazon.” right away.
This will have an effect on consumer trust and sales. If shoppers trust you, they are more likely to click “Buy now” on your website.
CONS:
No Records of Stock
You will have a lot of products that don’t sell. If your stock gets too big, you might not be able to keep track of it well.
Competition Is Tough
FBA is definitely a good competitor for Amazon. FBA won’t be your only way to make money. Your company won’t be the only one selling the same things. It might be hard to compete with business owners who have been in business for a long time.
No Promise of Money
You probably won’t make money on every product you sell, so you need to be careful when putting together the mix of products you want to sell.
Shipment Issues
- Amazon’s FBA program can’t deliver items that can catch fire.
- Lack of Knowledge of Dependence
- If Amazon’s rules change, your store will be taken off of its platform. You will lose everything you’ve worked for.
- Not Direct Contact with the Customer
Amazon has all of the information about your customers, but you do not. Wouldn’t it be great if you could keep selling the same things to the same customers? Whoops! You can’t do that, though, because you depend too much on Amazon.
There are differences between dropshipping and Amazon FBA.
From what you’ve read, Amazon FBA and dropshipping sound a lot alike, don’t they? Both of these things can be done from a distance to make sure that your customers get good service.
Dropshippers are the middlemen between you (the retailer) and your customers. You are in charge of processing orders, taking care of payments, answering customer questions, and taking care of refunds and returns. You won’t have to worry about storing or shipping your goods.
You won’t own your products in the traditional sense because your dropshipper will own them until an order is placed, and then your customer will own them once they’re sent out. You will never have to touch the product, unless you need to send it back.
Amazon FBA also has all of these benefits, but they also take care of returns, refunds, and customer service. The product won’t be taken care of when it comes to orders and shipping, but it will be up to you to find it and send it to one of Amazon’s warehouses.
There doesn’t seem to be much difference between dropshipping and Amazon FBA, so let’s look at the pros and cons of each. This is where some important differences come into play.
Which is better for my business: dropshipping or Amazon FBA?
You’ve seen that each choice has good and bad points. Both Amazon FBA and Dropshipping have a lot in common, but it won’t be easy to choose between the two. Both choices will need your time and attention.
It’s important to think about your personal and business situations. Dropshipping is a very low-risk way to start an eCommerce business because it doesn’t require an initial investment.
This is very appealing if you don’t have any money, and you can easily promote your chosen products on a number of platforms, such as Shopify, which is a low-risk and low-investment way to start a business. Setting up a dropshipping account makes it easy to do business in this way.
If you don’t like taking risks and want to try out an eCommerce business, you might want to think about dropshipping.
Amazon FBA and the large amount of leverage you’ll get from Amazon’s existing audience is a huge win for people with money and who are willing to take more risks.
If you already have an online business and want to grow, Amazon FBA could be a good choice. It does require a fair amount of money, but that doesn’t mean it will be successful. Because of how Amazon FBA works, you can focus on getting the word out about your products and business.
In either case, you won’t be in charge of every single part of your business. As a dropshipper, you will have to follow the rules and regulations of Amazon FBA and make very little money.
Bottom Line
It’s not easy to make the right choice. You should choose between Amazon FBA and dropshipping based on how much you can invest and how much risk you are willing to take.
The best way to save money and avoid bigger risks is to start a dropshipping business. Dropshipping and Fulfillment by Amazon (FBA) are also ways to start an eCommerce business, but they can be complicated.
Also, dropshipping seems like a good option if you want to start an eCommerce store because it requires less money and has less risk.