Amazon FBA vs Dropshipping in 2024: Don't Choose Wrong

If Have been in the E-commerce Space and want to Start Your Ecommerce Business From Scratch, then there are lots of different Models that come into play, However, Dropshipping and Amazon FBA are both very popular ways to Start.?

Infact, According to the Latest Data, There are 64% of Sellers on Amazon Choose Amazon FBA to selling the Products and also 27% of All E-Commerce Sellers Use Dropshipping Business Model to Actually Fulfill the Products. And the Numbers are going higher and Higher Each Year. Which simply Means You Have Great Potential if You want to Start a Successful E-commerce Business Right away. (When I Say Dropshipping, I’m simply saying Dropship on Shopify).

But In General, You Don’t Start both at the same time and they Can Operate Differently from each other. And A lot of the time, You’ll be Asking the Most common questions Like which Business Model Should I choose, What will be the Potential Profit, Scalability, and whether Can I Start with a Little investment right away.?

That’s Why I Take Time to Dig Deeper on Both Models to Really Understand Which Can be the Best For You. While I can’t Tell You Exactly What Should You choose, But It Ultimately depends on Your Situation whether You Want to Start with?Low Budget or You Don't Like to do the fulfilment Process from Your Own Because Amazon does well. ?

I'll Cover The Following Key Points in This Post:

• I’ll give You a basic overview of Dropshipping and Amazon FBA
• What are the Potential Benefits and Drawbacks You Have with Both
• What will be Your Startup Cost & Risk on Both Business Models
• How Much Control & Freedom You Have with Each One
• How Much Competition Do You Face on Both?
• Ultimately Which Should You Choose, So You have a Pretty Basic Idea of Which Business Model Fits within Your Situation as well.?

So, Let's Start with the Basic Intro…!?

What is Amazon FBA??

Amazon FBA (Fulfillment by Amazon) is a service provided by Amazon that allows individuals and businesses to send their products to Amazon's fulfillment centers, where they are stored, packed, and shipped to customers. This means that sellers do not have to worry about the logistical challenges of storing and shipping their products themselves, as Amazon takes care of these aspects.

To start an Amazon FBA business, individuals first need to create an account on Amazon Seller Central and decide on the products they want to sell. They then need to source these products and send them to Amazon's fulfillment centers. Once the products are received, Amazon takes care of the rest, including storing the products, picking, packing, and shipping them to customers. Sellers can also benefit from Amazon's customer service and returns handling, making it a convenient and efficient way to run an e-commerce business.

What is Dropshipping?

Dropshipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. This means the store never sees or handles the product. Dropshipping on Shopify is a popular way for entrepreneurs to start an online business without having to worry about inventory or shipping logistics.

To get started with dropshipping on Shopify, you first need to set up a Shopify store and choose a dropshipping supplier. Next, you'll list their products on your store and start marketing to attract customers. Once a customer makes a purchase, you simply place an order with the supplier who then ships the product directly to the customer.

So, now that You’ve Clear Understanding of both Dropshipping and Amazon FBA, Lets go over some of the Pros & Cons You have.?

Dropshipping vs Amazon FBA: Pros & Cons

So, now that You’ve a Clear Understanding of both Dropshipping and Amazon FBA, Lets go over some of the Pros & Cons You have.?

Amazon FBA Pros & Cons

Pros:?

• Easy Fulfilment: The biggest advantage of Amazon FBA is their Great fulfillment Service (Meaning Amazon will Take Care of Picking, Packaging, and Shipping the Product For Your Customer), Plus they also Handle All the Customer Support Services and You've full Freedom in Regard
• Reach Global Audiences: Because Amazon has a higher Trust Ratio (Pretty Much Established Brand) You've Opportunity to Find a wide range of worldwide Audiences to sell Your Product without Hard Marketing than Dropshipping (Not the mention Amazon has Higher Conversion Rates because Its Trust)

Cons:?

• Not Very Cost-Effective: The Biggest Drawback You have with Amazon is their Fee. Normally They charge You around 15% Fee for Actually Storing Every Single Product (Meaning You’ll Need to Spend 15% of Your Total Product Cost to be able to Start) Plus, If the Product is Heavy-weight, then You’re going to Pay a Much higher Fee than the light-weight Products, Which Ultimately Hurt Your Profit Margin. ?
• Requires Additional Fee: There’s also Biggest con with Amazon FBA is their Other Hidden Fee (That Most people aren’t aware of this) Like if?And If You Count all the Expenses & Fee and Just start from Scratch, Chances will be You'll see yourself in the Little Dept than the Profit Which can be a Downfall.
• You're Limited on Amazon: You’re Tied to the Platform Like You Need to be Approved (By Amazon) for Active Listening, and You’ll Need to Comply with their Policy and Regulations, (For any Reason You Violate any of these, then Amazon will Delete Your Account), Which means You can't do something that Amazon doesn't allow You While selling on it. Plus You Can’t Customize Everything and You don’t have a Lot more Control over that Compared to Dropshipping. Which is the Biggest Con of Amazon FBA that Most People overlook.?
• Not Very Scalable Business: Because You’re Selling on Amazon (with their Strict Policy), Which Means You’ll have Little to No Scalability For Your Business and You Can’t Create your Separate Identity on it Compared to Dropshipping if You're going with Amazon FBA (Not to mention Amazon won't Let You See Your Customer's Details Like their Name & Email Address which You can Use to Regain them back to Your Store/website and Sell so many different Offers directly through Emails Messages)

Dropshipping on Shopify Pros & Cons

• Easy to Start & Flexible: The Biggest Advantage of Dropshipping is that You’re Selling the Products without limitations Like You Don’t Need to Comply with Any Certain Rules (Unlike Amazon) and You’ve way more control in your hands than Amazon. You can Literally Start with a Shopify basic subscription, Create Your Brand New Store, and sell an Unlimited amount of Products with all the flexibility that Shopify offers
• More Control: And Because You’ve More Control on Dropshipping, Meaning You Can Literally do Anything Like Customize Your Online Store, Create Your own Brand Identity, Create the Best Offers For Your Customers and Sell the Products without upfront fees Which can Be the Biggest Advantage If You’re selling with lower Margin and Finding a Long-term Success.
• Low Startup Cost: It’s going to be a lot Cheaper & Easy to Start Than Amazon (Because if You’re going to sell On Amazon, You’ll Need Approval, Verify Your Tax documents, Agree to their Terms & Conditions, Spend the More Upfront Fee to actually Store Your Product on amazon Warehouse) This is why Shopify Dropshipping is Better Option For Most Small Businesses who want to Start with Very Low Budget.?
• Less Competitive Than Amazon FBA: Something that’s Equal between both Dropshipping and Amazon FBA is that both of them are very Saturated Markets and there's a lot of competition You’ll face, But at this Point, Dropshipping is the Best Way to Stand out from the competition if You’re doing it correctly, Like Selling the high-Quality Products to the Right People, and with Higher Profit Margin, While on the Other hand, Amazon does have lots of competition for Every Single Product, Like there are Hundreds of Sellers that are selling the same type of Product, and Customers have tons of different choice, and they are more likely to buy the Product that has high Quality Reviews, Cheaper Pricing Which is something Never have with Dropshipping (Not to Mention if You’ve negative reviews, then Amazon will kick of Your ranking, Because ranking is Calculated through factors and reviews are the biggest factor on one of these) Which Ultimately means You have a very Higher Profit Margin with Dropshipping?
• Highly Scalable: Another Big Advantage that not many people realize that Dropshipping is also have more scalability for Your Business, Once You’re Getting more and more sales, You Can re-invest those Money and Build Your Brand which is Good thing You have, But Not on Amazon FBA, because Every Single Order will cost You purchasing, Storing and Shipping Cost (Just of Sake their Excellent fulfillment Process), Plus You’re Tired to their Platform and You can’t Scale it too much because You’ve Limitations?

Cons:?

• Need Strong Marketing Strategies: Now Because You Started a Brand new Dropshipping Store, You’ll Need to do work hard to Get Customers to Your Shopify Store in Order to Get Purchased, this can be done by Marketing Your Products like Running Paid ads (on Tiktok, Facebook, Instagram) Plus You can Do this By Posting Regular videos on Tiktok without spending money on ads. So this is point where You’ll Need to pay attention if You Need success in Dropshipping
• You're Dependent on Your Supplier: You’ll Need to Choose a Reliable Supplier from the different Marketplaces To fulfill Your Orders Because Dropshipping can be handled by Your supplier and You’ll be More responsible, You’ll Need to handle all the Customer Support services. You're Pretty Much Dependent on Your Supplier. (However if You choose the Right Supplier that fits your situation, then It’s going to be way More Easier and Efficient

The Startup Cost for Both

Now the Cost of Dropshipping will be a lot lower and You can Start literally from $3k to $5k which includes all Your expenses including Your Shopify Monthly Subscription, Your Marketing Budget, and the Resources You Use to Research the Products as well.?

On the Other Hand, the Subscription of Both Amazon and Shopify (For Dropshipping) Can be the Same, but What Matter is How Much You're paying to Actually run the Entire Business, In General, You’ll have some upfront costs with Amazon to Store & Fulfil Your Product (some other Hidden fees) in the Beginning, therefore, Dropshipping can be Cost-effective and Easier.

How Much Freedom and Control You Have with Both

Start with Amazon: If You’re Starting Amazon FBA, then You’ll Need to Comply and Agree to their Terms & Conditions and You Don’t have More Control over the Process

Start with Dropshipping: Dropshipping is a Safer Option because You don’t Need Extensive Verifications to be able to sell Your Products on Shopify (Just Need some Legal Verifications with Both), and You have more Control and Freedom with Your Store, Like You can Import the Products (with Actual Images) to Your Shopify Store from anywhere, Import the Fake Reviews, Customize it to feel looks Good that Align Your Brand Identity (Unlike Amazon doesn’t allow anything, they just gives You simple listening)

So, Overall the Freedom with both is depending on Your situation, If You Find the Good supplier, You can actually Get the same Freedom with Shopify Dropshipping as Amazon Fulfillment, But with Very Lower Fees. Now When It comes to Control, Dropshipping is definitely Ranked Higher Compared to Amazon.

The Competition On Both

Now, If You’re Starting any Kind of Ecommerce or Other Business, You’ll have challenges and Competition and it is Everywhere. The Only way to Stand out the Competition is By Doing something Unique that No One Else (Or Most People) aren’t Doing. You know that This would Help Your Customer’s Journey, Make their Decision Easier, and Ultimately solve their Problem.?

Of Course, Amazon FBA and Dropshipping Both are Very Saturated Markets, However in My Experience, Dropshipping Can be a little Easy to compete with others because You Have all the Control and You can do something Unique (Like Build A Brand) and Sell High-Quality Products with Your Own Profit margin.?

But With Amazon, You’re Competing with Hundreds or Even thousands of Sellers who are selling the Exact same Product as Yours, and You’ll have a very hard time competing and Doing something Better than them (By Lower Your Prices (But This will eat Your Profit), Giving Your Customers Best Service and Shipping Rates and Getting High-Quality Reviews)

Overall, Both Markets have competition, but It’s Easier to Stand Out from the Crowd with Dropshipping by building Your Brand and selling Good Products.?

Amazon FBA vs Dropshipping: Which is the Best?

Both Really Good E-commerce Business Model, But the main difference is You Can sell with Amazon without worrying about the fulfillment Process, because that's All it does very Well For You, but On the same time You're pretty Much Agree with their Strict Guidelines & Higher Fee, whereas Shopify Allows You start at little investment, with No Strict Policies, No Upfront Cost and More Control on Your Business. But You're pretty Much relying on Your Supplier, which is the Only drawback You have with Dropshipping. But if You do some extra work, find reliable Supplies that can handle your fulfillment Process effectively, You’ll be seeing Yourself a much better and more comfortable with that. Not to Mention It's a lot Easier to Scale.

And One Thing You Should Always Keep in Mind When Starting any Kind of Online Business, like What will be the the Potential risk. The Biggest Advantage which I think You have with Dropshipping is that, Shopify Doesn't charge You any Fee Unless You Not make any sales, Unlike Amazon, where you pay more fees, No matter how much You’re Making or Even Making Nothing at all, meaning Dropshipping on Shopify is a lower risky than Amazon FBA.?

My Verdict: So If You want to Run a Scalable Business with Less Budget and Low risk, then Dropshipping is the Better Option You Should Go For, While if You're OK with their Higher Fees & Restrictions, and You want to Start with Less Focus on Marketing, then Amazon FBA Could be another Viable Option for You. At the End of the Day, It doesn't Really Matter that You Pick One, then later on Once You're in Profit, You can Run Both Businesses on your own or Your Team. However in the beginning It's Crucial to Choose one that really fits Your Situation Because You won't have much Experience in the Startup Age and Even a higher budget.

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