Dropshipping VS Amazon FBA: What’s the Difference?
Comparing dropship vs amazon FBA can be challenging, but it will help you choose the best eCommerce business model for your store. These two eCommerce models are top-rated by entrepreneurs and often the go-to choice for starters.
Dropshipping and Amazon FBA have differences. For example, with Amazon FBA, you have to store your merchandise in Amazon's warehouse. At the same time, you act as the middleman between the supplier and customers and don't need storage space.
If you want to start an eCommerce store, you must be curious about dropship vs Amazon FBA. We will also mention the pros and cons of each to help you decide.
Let’s get started.
What Is Dropshipping?
Dropshipping is a fast-growing eCommerce business model because of its ease of use. The service allows small businesses to start and pick up quickly because it does not require a high start-up fee.
A dropshipping agent acts as the middleman between the customer and the supplier. They advertise the products through different stores like Shopify, Amazon, and eBay but have suppliers in various locations.
When a customer buys a product, the agent contacts the supplier who packs and ships it. The beauty of dropshipping is that the customer will know that a third party dispatched the item.
Dropshipping makes it easier for customers to buy items because the agents ship them on their behalf. Furthermore, there are low chances of taking on losses because, as the agent, you pay for the items only once the customer pays you.
However, although it is easy to dropship, your hard work in the business will determine how well it grows. For example, you have to get suitable suppliers to bring you the items on time to ensure consistency and maintain your customers.
What Is Amazon FBA?
Canadian citizens claim that it takes a long time to get a job in Toronto, but you can employ yourself at Amazon FBA almost immediately. FBA stands for Fulfilment By Amazon, and it is another commonly used e-commerce business model.
With Amazon FBA, you use the Amazon site to list and advertise your products. When a customer orders an item on your platform, you get it from Amazon's warehouse, which packs and delivers it to your customer.
Differences between Dropship Vs Amazon FBA
Although Amazon FBA works almost like dropshipping, you use Amazon's site for advertising and store the products in their warehouse. The store will also take care of your customer service and returns, so you have less work to do.
However, as an Amazon FBA entrepreneur, you are responsible for sourcing and shipping the items to Amazon's warehouse. The warehouse crew will then send the orders to your customer.
On the other hand, you become the middleman between your customers and the supplier if you choose dropshipping. Therefore, you will not worry about the products' storage, packaging, and shipping.
However, as the middleman, you answer all the customers' questions, process the orders, and handle the payments. You will also be accountable for any returns. The disadvantage is that you might never feel like you own a business because all the items belong to the supplier.
The differences between dropshipping and Amazon FBA can help you choose the eCommerce model depending on your interests. However, if the differences are not enough to help you decide, compare the two models using the pros and cons.
Pros of Dropshipping
Checking the pros of any model or item gives you a clue on the benefits you will enjoy when using them. If you choose dropshipping, you will get;
Starting dropshipping is cheap because you are not buying products or paying for storage space. The low capital requirements make it easy for starters who cannot afford the hefty start-up capital.
Dropshipping is not as demanding as a physical store. Since it is an online store, you can freelance and travel the world. Although the supplier will pack and ship the items, you deal with any returns and complaints.
Dropshipping allows the entrepreneur to deal with a various number of products. It is also easy to focus on another product if your current one does not sell well. Owning a store does not allow you to change the products you are dealing with because you will incur losses from your existing stock.
You can work from any location when doing dropshipping. The business requires your time and internet access to communicate with your customers and suppliers. You can also run the business without employing another person.
Cons Of Dropshipping
Knowing the cons of dropshipping is also essential because it prepares you to deal with them. Some of the drawbacks are;
Since you are getting the items from another supplier, you cannot overprice the products for higher profits. The customers will often look for cheaper places to buy from if you do this.
Some suppliers will not let you know every detail about a product. Therefore, it will be hard to answer any customers' questions, and you could get more returns if the product does not satisfy customer needs.
Pros And Cons Of Amazon FBA
While comparing Shopify dropshipping vs Amazon FBA, you have to consider the pros and cons of both business models.
Pros of Amazon FBA
Less Work and More Focus On the Business
With Amazon FBA, the store packs and ships your orders to the customers. Also, since they are responsible for customer service, you will have less work to do. This gives the entrepreneur ample time to focus on their business growth.
Amazon has a large customer base, and since it has a good reputation, most people buy items there. Access to a large customer base allows your business to grow faster, which is every entrepreneur's dream.
The more extensive customer base gives your store more exposure, and more clients will order items through you. Also, if you have products that did not sell on your website, you can sell them on Amazon using their rates. This will earn you high profits.
Returns And Replacement Policies
Amazon takes care of the packaging and shipping. They also handle your customer services, which can be challenging to business owners. However, if a customer wants to return or replace the item, they must follow Amazon's policies.
Cons Of Amazon FBA
Do not be overwhelmed by the advantages and fail to check the cons of Amazon FBA. Some of them are;
With all the advantages of Amazon FBA, most entrepreneurs want to invest in it. This brings a lot of competition because you will not be the only one selling the product. If you are not a very experienced entrepreneur, the competition might be hard to keep up with.
No Direct Access To Customers
Once you get customers ordering your products, Amazon does all the work to package, ship, and take care of customer service. You, therefore, will not have customers of your own, and you might not be able to retain the same customers.
You have seen all the comparisons between dropships vs Amazon FBA, but it might still be hard to decide. Dropshipping will be ideal if you start your business because there are fewer capital requirements. Amazon FBA is suitable for long-term entrepreneurs who want to expand.