In search of a comparison between Amazon FBA and Dropshipping? Here's our Amazon FBA Vs Dropshipping article to provide you with what you are looking for!
When it comes to launching your own e-commerce business, you may wonder if you should use Amazon FBA (fulfillment by Amazon) or dropshipping as your primary sales channel. Many get stuck around the question of whether Amazon FBA or Dropshipping is a better choice for them. The fees, management, fulfillment, and everything else make a difference when it comes to performing sales online.
Both of these models have their pros and cons, and it’s important to understand them before you choose which one is the best for you. Both of these business models have a lot to offer and fortunately, they can be used in conjunction with one another. That said, there are some fundamental differences between the two that are worth exploring further.
|Fulfillment done by Amazon||Fulfillment by Dropshipping Supplier|
|Charges are taken by Amazon to perform fulfillment including storage and package||Charges of delivery and other parameter is taken by the Supplier and delivery partner|
|Small fulfillment fees is taken for every sale made||No additional charges other than shipping process and the cost of the product|
|Products taken care by Amazon Fulfillment centers & sold on Amazon as a selling platform||You need to make your own website, using Shopify, Woocommerce, etc.|
Similarities Between Amazon FBA and Dropshipping
Dropshipping and Amazon FBA have a few similarities. Because of these similarities, e-commerce entrepreneurs and solopreneurs select Amazon FBA and dropshipping as the first gateway. You'll find the following advantages in both FBA and dropshipping that you will certainly appreciate. Both the FBA and dropshipping models require minimal effort from the seller. You might require a number of steps to keep your inventory in stock and boxed. However, FBA and dropshipping are simpler than handling everything associated with e-commerce yourself. As a result, you can start them with minimal capital and knowledge.
Amazon FBA or dropshipping does not require online store expertise. The process is simple to follow, and you can find a large amount of instructional content and supportive material online. Even if you encounter issues setting up your Amazon FBA or dropshipping company, you don't have to be concerned.
With both dropshipping and Amazon FBA, you don't need to worry about fulfillment. With Amazon FBA, the order is either delivered to the customer by the Amazon warehouse or by a dropshipping company. There are a few other similarities as well. Returns/replacements are usually not an issue, for example.
What is Amazon FBA? Amazon FBA Overview
Fulfillment by Amazon (FBA) is a program that allows you to ship your products to Amazon’s warehouses and have them handle all the logistics of getting those products to your customers. You’ll have to pay a monthly fee to participate, and you’ll be charged a per-item fee when your product sells. When you choose to sell your products through Amazon FBA, you’ll be responsible for finding a product that sells well in your target market. You’ll also need to ensure it can be sold in every state because Amazon won’t ship products that cannot be delivered to certain areas. Some products, like food and drink, will be easier to sell than others.
When to Use Amazon FBA?
Amazon FBA and dropshipping both have their benefits and drawbacks, so it’s important to choose the right model for your business. To help you make the right decision, here’s a breakdown of the advantages and disadvantages of each.
Why Choose Amazon FBA?
- You’re not sure which products to sell– Amazon has a wide range of products, many of which are seasonal. If you aren’t sure which products will sell, look to Amazon for ideas. You can also use their search data to determine what products are trending, and which ones are likely to be purchased again in the future.
- You want to sell products that are difficult to ship– Some products, such as items that are large and heavy, are difficult to ship and can be costly to transport. Amazon FBA offers great shipping rates that can help offset the cost of shipping these products, and you won’t have to worry about them getting to their destination on time.
- You want to sell products in all 50 states– If you want to sell products in all 50 states, Amazon FBA is a good option. You’ll need to ensure that you’re picking items that can be shipped to all 50 states and can be sold to all customers, but if you’re able to find those items, you can sell them on a massive scale using Amazon’s network.
There are a few key reasons why people choose Amazon FBA over dropshipping. First, Amazon is a trusted brand with a huge customer base. This means that when you sell through Amazon, you automatically have a built-in audience for your products. Second, Amazon handles all the shipping and logistics for you. This can be a big advantage over dropshipping, where you have to handle all of that yourself. Third, Amazon has strict quality control standards that you have to meet in order to sell through its platform. This helps to ensure that only high-quality products are being sold.
Finally, Amazon offers great customer service. This can be a big help if anything goes wrong with an order. All in all, these factors make Amazon FBA a great option for those looking to sell online.
Pros of Using Amazon FBA
- You’re selling big brand names. With Amazon FBA, you’re selling products that people love and trust. Customers will know what to expect when they order from your store, and they’ll also have access to the product reviews and information they need to make an informed decision.
- You have an established network of suppliers. Amazon has been in business for decades and has built relationships with some of the biggest suppliers in the world. If you’re selling a product that is difficult to ship, you’ll be able to connect with the right supplier for your product and sell it on Amazon.
- You have access to Amazon’s massive customer base. Amazon has a huge customer base that you can tap into with FBA. You’ll be able to reach customers in every state and grow your business as large as you want.
- You have access to Amazon’s advertising program. Amazon’s advertising program can help you bring in new customers. You’ll be able to put ads on search engine results, on Amazon’s website and in other places where people shop online.
Cons of Using Amazon FBA
- You’ll have to adhere to Amazon’s strict regulations. If you sell on Amazon FBA, you’ll have to follow their policies and regulations. This means you’ll be responsible for getting your products to their warehouse on time, and you’ll have to follow their rules on what you can and cannot sell.
- You won’t make as much profit. Amazon FBA is great for selling big brand products, but it won’t help you find untapped niches with low competition. If you use this model, you’ll have to compete with Amazon itself and other big brands.
- You don’t have full control of the customer experience. When you sell on Amazon, you’re working with their customer service team. If a customer needs to return a product or ask a question about your product, they will likely deal with Amazon and not you.
- You’ll have to deal with Amazon’s strict regulations. While selling on Amazon FBA has a lot of benefits, it also comes with its share of drawbacks.
What is Dropshipping? Dropshipping Overview
Dropshipping is the practice of selling products without actually having those products in your possession. Instead of purchasing your inventory upfront, you connect with a supplier and place an order for the items you plan to sell. Once those products are shipped to your customer, you’ll receive a notification and pay the supplier for the items. Once you’ve established your reputation as a reliable buyer, it’s likely that your supplier will offer you discounts on your future orders and may even offer free shipping.
This can help offset some of the upfront costs you’ll incur by using this method to sell your products. When your inventory runs low, you can simply place another order with your supplier. Dropshipping is a great option for those who want to get into the e-commerce game without having to invest a lot of money upfront. You don’t have to purchase products you know you can sell — and you don’t have to worry about storing them.
Why Choose Dropshipping?
- Your product will sell out: If you’re trying to sell a single product, you may have a difficult time getting it re-stocked as quickly as customers are buying it out. If you’re dropshipping your product, you’ll be able to reorder more whenever you sell out.
- You want to sell a small number of items: If you’re starting out, it’s unlikely that you’ll be able to purchase enough inventory to sell multiple items. If you’re dropshipping, you can sell a single product multiple times without having to worry about re-stocking.
- You want to focus on marketing and customer service: If you want to put most of your energy into marketing and customer service, dropshipping is likely a great option for you. You’ll only be responsible for placing your first order, and then your supplier will take over from there.
There are a few key reasons why people choose dropshipping over Amazon FBA. First of all, dropshipping is a lot cheaper to get started with. You don't need to invest in inventory, which can be a big upfront cost with Amazon FBA. With dropshipping, you can also get started much faster. There's no need to worry about packaging or shipping products, as that's all taken care of by the supplier.
You also have a lot more control over your business with dropshipping. With Amazon FBA, you're at the mercy of Amazon's algorithms. But with dropshipping, you can easily change your pricing, product selection, and marketing strategy to suit your needs. Finally, dropshipping gives you the opportunity to build a brand, whereas with Amazon FBA you're selling products that are already established brands. So if you're looking to build a long-term, successful business, dropshipping is the way to go.
Pros of Dropshipping
- You’re not responsible for managing inventory. If you’re dropshipping, you won’t be responsible for maintaining and managing a large inventory. This can save you time and money and help you focus on growing your business.
- You can sell niche products. If you choose a niche product that few people are selling, you won’t have to compete with Amazon. You’ll also have fewer customers to deal with, which can make customer service easier.
- You can sell products that are difficult to ship. If you’re dropshipping a product that’s difficult to ship, you won’t have to worry about finding a supplier who can ship it for you.
- You can create exclusivity with limited availability. If you’re selling a product that’s difficult to find, you can make it even more exclusive by only offering it to your customers on a limited basis.
Cons of Dropshipping
- You won’t make as much profit. You’re not paying for an upfront cost, but you also aren’t making as much money. If you use dropshipping, you’ll be making your profit off of the mark-up of your products.
- You don’t have full control of the customer experience. If you’re dropshipping, you won’t be able to solve customer issues with ease.
Top FAQs on Amazon FBA vs Dropshipping
Is Amazon FBA same as dropshipping?
No, Amazon FBA (Fulfillment by Amazon) is not the same as dropshipping. Both are ecommerce business models, but they have key differences. With Amazon FBA, your source and ship products to Amazon, which then stores and ships the products to customers on your behalf. Dropshipping, on the other hand, involves partnering with a supplier who ships products directly to your customers on your behalf. Amazon FBA can be a more hands-off business model, but it typically requires more upfront investment. Dropshipping can be a more flexible business model, but it often requires more work on your part to manage orders and suppliers.
Can I dropship on FBA?
Yes, you can dropship on Amazon FBA. However, there are a few things to keep in mind before you get started. First, it's important to understand the difference between Amazon FBA and dropshipping. Amazon FBA is a fulfillment service that allows you to store your products in Amazon's warehouses and fulfill orders through Amazon. Dropshipping, on the other hand, is a fulfillment method where you ship products directly from your supplier to your customer. You'll also need to make sure your products are compliant with Amazon's guidelines. This includes things like having a professional-looking listing and using high-quality product images.
How much money do you need to start Amazon dropshipping?
To dropship on Amazon, you must sign up as a seller on their website. The Individual plan costs $0.99 per unit sold, while the Professional plan costs $39.99 for as many items as you sell.
How much time will it take to be a profitable dropshipper?
Trying to succeed in the dropshipping business requires a significant amount of effort. Many dropshippers put in at least 60-70 hours a week in the initial phase to make their business a success. But as things get a bit more stable, the amount of work in terms of hours decreases.
How much does a dropshipper make annually?
Dropshippers can make between 20% and 30% profit margin on each sale or as much as $100,000 annually. That's between $1,000 and $5,000 every month. Dropshipper websites are hosted and marketing is included in the remaining money. The supplier purchases the goods, dropshipping fees are paid, and marketing is funded.
Conclusion: Amazon FBA Vs Dropshipping | Which one is Better?
While both of these models have their pros and cons, there are some fundamental differences between the two. For starters,
- Amazon FBA is a program that allows you to ship your products to Amazon’s warehouses, and Amazon then handles all the logistics of getting those products to your customers and refunds the money you paid if the items never sell.
- Meanwhile, dropshipping is the practice of selling products without actually having those products in your possession. Instead of purchasing your inventory upfront, you connect with a supplier and place an order for the items you plan to sell. Once those products are shipped to your customer, you’ll receive a notification and pay the supplier for the items.
After getting along with all the important aspects of both Amazon FBA vs dropshipping, plus understanding what the pros and cons of both of them are, maybe you can choose which one is best suitable for you.