When most people think of e-commerce, they think of having their own product. This is no longer true. The e-commerce business has changed over the years, and now there are many ways to start your own business.
Dropshipping and Amazon FBA are both good examples of this. Dropshipping lets you sell things even if you don’t make them yourself. You make your own products for Amazon FBA, but you don’t need a website.
But what is different about the two? Is Amazon FBA better than dropshipping, or is it the other way around?
Today, you’ll learn how these two things work and what their pros and cons are, so you can decide which e-commerce platform is best for you.
How does dropshipping work?
Dropshipping is an e-commerce strategy in which you, the dropshipper, sell products that you did not make. To do this, you need to set up your own store, where you can charge your customers.
Your e-commerce website needs photos and descriptions of the products you sell. It also needs a payment processor so that you can take credit card payments or other types of online payments.
When a customer buys something from you, you have to order it from your supplier, and your supplier will send it to the shipping address your customer gave you.
Since your customer thinks you’re the one who made the product, it’s up to you to take care of their problems.
Here’s a quick summary of how dropshipping works:
- You pick a vendor and products.
- You put these items on sale at your dropshipping store online.
- When people buy them from you, you get the money.
- You place an order with your supplier.
- Your customer receives the item from the supplier.
You don’t have to keep an inventory, as you can see. This means that you can start a dropshipping business with a small amount of money. The only money you would have to spend is on a website, which you can make on your own.
Next, you only spend money when someone places an order. In fact, once the order comes in, you don’t spend any of your own money on it because the customer has already paid for it. You just have to pay it out of your own pocket to your supplier because it can take days before you can get the money from your customer.
Dropshipping is an easy way to start a business, as long as you sell great products with a large market and know how to promote your store. Many business owners choose it because it is easy to build and doesn’t cost much.
What is FBA by Amazon?
FBA stands for “Fulfillment by Amazon” on Amazon. In this type of business, you have to make or buy your own products to sell. You have to send these items to the Amazon warehouse, where they will be put in a catalog.
You can buy a lot of products from a supplier and have them sent to Amazon if you want to. You don’t have to make something on your own if you don’t want to.
Once they’ve sent you the right ones and marked them as yours, you can put them on Amazon. When a customer places an order, Amazon sends the item to the customer. This is why it’s called a “fulfilment service”—Amazon, not you, is the one who fills the order.
In short, it works like this:
- Join the Amazon FBA program and get accepted.
- Make your own things.
- Label or call them
- Send them to Amazon’s warehouse.
- Until you hear that your products are ready,
- Put the items on Amazon.com
- Wait for instructions.
As you can see, the biggest difference between Amazon FBA and dropshipping is that you need an inventory for Amazon FBA. This means that you have to spend money before you can sell anything.
You also have to get approved for the Amazon FBA program, but you don’t have to build your own store because Amazon already has a huge platform. You can’t do Amazon FBA if you weren’t approved.
You don’t have to worry about shipping rates or how shipping works with Amazon FBA. They look after it. Dropshipping works the same way, but your store must have different shipping prices depending on where the product comes from and where the customer lives.
Dropshipping’s Pros and Cons
Dropshipping is easy to set up, but it also has some problems.
Pros
It only needs a small investment.
You can start a business with dropshipping for as little as $29. If you use Shopify to build your store, you can get a plan for only $29 per month. You don’t even have to pay this every year, because Shopify will charge you every month. If you don’t want to keep going, all you have to do is cancel the subscription.
Also, you don’t need an inventory to get started. All you have to do is find a dropshipping supplier and list their products on your store as if they were your own. Also, you only pay for the product when a customer orders it from your store.
No trouble shipping.
You don’t have to worry about packaging and shipping when you use dropshipping. The dropship provider takes care of all of these things. You can even ask them to take their brand name off the product and put yours there instead.
With dropshipping, all you have to do is find out where your supplier ships and how much they charge for each country. Once you have this information, all you have to do is put it to use in your own store to charge your customers the right amount for shipping.
Easy to make bigger
Once you get a lot of traffic to your dropshipping store and start making sales, it’s easy to add more products to sell. Once you add these products, you can make bundles, coupons, discounts, and even send free items in exchange for a higher order value.
You can also start a new store, but in a different niche, if you want to. Since you did well on the first one, you should have learned a lot from the mistakes you made before. You would find it easier to market your new store if you just did the same things that made your first store successful.
Cons
Quality of the product and shipping time
In a dropshipping business, you don’t have any say over how good the products you sell are. Since you didn’t come up with the idea or make the product, you have to rely on what the supplier does. If you choose a bad product, your customers will ask for their money back, and you will lose money.
Shipping is another thing you can’t change. Some suppliers take days to find the item in a warehouse, and they can also send the wrong item. If you dropship from China, it can take up to two months for the package to get to the customer.
It’s hard to sell.
As a dropshipper, it’s up to you to come up with your own marketing plan. You can write blogs, make YouTube channels, or make ads. Some of these ideas might work, while others might not. If you don’t know much about digital marketing, you will have to try things and see what works.
You’ll also have to deal with a lot of tough competition. You’re not the only one selling the same things that your supplier gives you. You don’t know if the supplier has other dropshippers like you, but it’s possible. In this case, you should know how to market your store better than your competitors.
Amazon FBA: Pros and Cons
Manufacturers and artists like Amazon FBA because they can sell their products on a huge platform and don’t have to worry about shipping. But does it have any downsides?
Pros
Don’t have to market
If you sell on Amazon, it’s like being a fly on a cow. You have nothing to worry about when it comes to marketing. Amazon spends a lot of money advertising its products, which means you don’t have to.
In addition, the Amazon website itself is a great way to market. They give users suggestions for products based on the words they use in their searches. If your products show up when people use these search terms, you’ll make sales without doing anything.
No trouble with shipping.
The shipping time from Amazon is the best. It can’t be beat. It ships within 24 hours, which no one else in the world can do better. You don’t even have to worry about setting your own shipping rates when you use Amazon shipping. Since your items are in the Amazon warehouse, they would take care of it.
Even if you sell to people in other countries, Amazon would decide how much to charge a buyer from another country. Really, all you have to do is sit back and wait until someone buys something.
More money made
Even though you have a lot of competition on Amazon, you can set your prices however you want. Amazon doesn’t really care because you have to pay them fees when you make a sale and a storage fee.
Since Amazon is a trustworthy company, you can price your goods at the higher end of the price range. Just write your product description in a way that makes the reader think that yours is the best.
Cons
Huge capital is required
The fact that you need a lot of money to get started is one of the worst things about the Amazon FBA business model. If you make your own goods, you will need to buy equipment, which means you will need money. You also need money to buy raw materials and to ship the items to the Amazon warehouse.
You could also buy ready-made products, most of which come from China and can be bought in bulk for a low price. But again, you need money to buy in bulk. If each item costs $10 and you need at least 100 of them to buy in bulk at that price, that’s $1,000 even though you haven’t sent it to Amazon yet.
Costs are high
Just because you ship the item to Amazon doesn’t make Amazon FBA a free business. As a professional seller, you have to pay 15% of the sale price as a referral fee. You also have to pay a flat fee of $1 for each item you sell.
On top of that, if you sell more than 40 items on the platform, you have to pay $39 per month to be a member. If you pay for this, you don’t have to pay the $1 per item fee. You also have to pay a fee to store your item, the amount of which depends on how big it is.
Questions People Usually Ask
What’s the difference between Dropshipping and Amazon FBA?
Here are the biggest differences:
- In dropshipping, you don’t have to keep any stock.
- In dropshipping, you have no say over the quality of the products.
- Fees for dropshipping are not too high.
- When it comes to shipping times, Amazon FBA is better.
In both business models, you don’t have any say over how the products are shipped because you no longer have them. But Amazon does a better job because they have their own warehouse staff and shipping partners.
Is drop shipping better than affiliate marketing?
If you want to make money while you sleep, you need to do affiliate marketing. In it, all you have to do is say good things about other people’s products, and if people buy them, you get a commission.
With dropshipping, you are more involved. You have to post products, take care of orders, answer questions from customers, and fix problems. If the products you sell are no longer popular, you also need to keep up with the times.
But it can take years to make money with affiliate marketing. To make content, you have to work hard, and you won’t make a lot of money until you get a lot of traffic.
Dropshipping is better than affiliate marketing if you want to make money quickly because you can make a sale in as little as a few weeks.
Which is better: Amazon FBA or dropshipping?
This depends on your circumstances and what you want. If you don’t know how to market your products and don’t mind paying fees, Amazon FBA is better. It is also much better if you want to sell your products all over the world without having to worry about shipping costs or problems with customers.
But dropshipping is the right choice for you if you know how to market and like to get followers and repeat customers. Starting an online business is also better for you if you don’t have a big budget.
Summary
If you are just getting started in the world of online business, you need to watch your money. Amazon is very risky because it takes a lot of money to start up. You can start a business with as little as $50 if you use dropshipping.
Dropshipping is different from Amazon FBA in that you will have to do more work with dropshipping. To sell, you have to upload your own products, manually fill orders, and come up with marketing plans.
If dropshipping doesn’t work, you’ll only lose a few dollars. But if Amazon FBA fails, you’ll be stuck with a lot of inventory at your house.
Before you decide, make a list of all the costs and things you need to do and pay for. Think carefully about the pros and cons and ask yourself which one is best for you right now.
