Amazon FBA vs Dropshipping

As an Amazon seller, you will have to deal with many processes for successful eCommerce store management. However, by adopting the right business model, your life will become much easier. So, this is when dropshipping, and FBA comes into play. 

Dropshipping has been around for years, and finally, it has a good competitor in the face of Amazon FBA, which proved itself to be just as efficient. In this article, we will review everything related to these two business models. By the end, you will be able to choose the one most suitable for you. So, if you are ready, let’s start! 

Which One is Better? Dropshipping Vs. FBA 

If you are planning to get started with your Amazon store, then you must be well aware of the options you will have when it comes to selling products. 

Those options include an FBA program and dropshipping. To understand which one is more suitable for your case, let’s dive deeper into each one of these concepts. 

What is Amazon FBA?

Amazon FBA stands for – Fulfillment by Amazon. This program allows sellers to outsource fulfillment of their orders via Amazon. 

How does it work? Well, let’s say you are selling pens. With the FBA program, your pens’ product stock will be stored in the Amazon warehouse. So, when you get an order, Amazon will ship it off. 

But the amazing part about the FBA program is that it handles not only storage and shipment but also returns and customer service. So, it saves you lots of time and resources as a seller, allowing you to focus on other aspects of your business. 

Key Benefits & Drawbacks of Amazon FBA 

To understand the whole picture, it is vital to consider both the pros and cons of any business model. In this case, we will review the benefits and drawbacks of fulfillment by the Amazon program. 

The Pros of the Amazon FBA program are: 

• 24/7 support from Amazon. With the Amazon FBA program, you don’t need to deal with client inquiries, as Amazon handles all of them. 
• Saves resources. Even though there are fees and investments associated with this program, overall, it still saves you money on storage, management, and employees to fulfill the orders/handle support. 
• If you are part of the FBA program, then your products are going to appear higher on the search rankings. Thus, you will potentially have more opportunities for sale. 
• Amazon has a good customer base. Millions of customers use Amazon on a daily basis. So, entering this platform already gives your business the necessary credibility to make sales and profits. 
• Amazon fulfills the delivery of your orders. This is a significant plus for you as a seller. Clients want delivery at lightning speed, and the systems Amazon has set have been successful for years. So, not only will you save resources and time on fulfilling deliveries, but you will also make sure your clients are satisfied with the speed. 

All the benefits are awesome, but there are also certain drawbacks. So, the cons of Amazon FBA include: 

• Significant investment in inventory required. Before you can start your business with the Amazon FBA, you must first invest in inventory. 
• Storage feed. Besides paying for the inventory upfront, you will also need to pay Amazon storage fees. 
• Requirements. If you are joining the FBA program, you must make sure that your products are up to the packaging and labeling standards. This is not necessarily a con, but it can be time-consuming.

What is Dropshipping?

Dropshipping is another business model many online sellers adopt. It involves a business or an individual purchasing the inventory from a third party at a wholesale price and selling it at a higher price. But, the nuance is that in dropshipping, you do not have a product stock. 

Here is how it works. Let’s say you found a watch for $20 on some third-party website, and you want to sell it on your website. So, now, you have placed the same watch on your online storefront with the product description and pictures but with a price tag of $35. 

When an order comes through, all you need to do is order the product from your supplier, but enter the customer’s shipping address. Thus, the watch will be directly delivered to your customer, and you will have $15 in profits. 

If you ask what dropshipping is on Amazon, it is essentially the same as above. Simply your storefront is Amazon instead of the other platforms. 

Key Benefits & Drawbacks of Dropshipping 

All of it sounds easy, but once again, dropshipping also has certain pros and cons you must consider before adopting it. 

Let’s start with the benefits of dropshipping: 

• No initial investment required. You can start a dropshipping business for free. The amazing part about it is that unless you make an actual sale, you won’t need to spend a dollar. 
• Unlimited profits. When it comes to dropshipping, your profits fully depend on your ability to make sales. So, if you know how to sell and market the products, you can grow your business as much as you want. 
• Source of passive income. Once you start scaling your business and have automation set in place, you gain insane time freedom. Let’s say you have a few products that sell well, and the ads, emails, and other marketing efforts are automated. In this scenario, you will need just a few hours a week to keep track of business operations and ensure they run smoothly. 

The main drawbacks many sellers face are: 

• You have to test over and over again. Even though dropshipping provides you with financial freedom, it is unlikely that you will achieve it within the first few weeks of getting started. You actually need to invest lots of time in the beginning to set up all the processes. 
• High competition. Dropshipping does not require funds to get started, so this business model is quite attractive to many people. The most competitive niches are housing and clothing. This, by any means, does not indicate that you will fail, but it still talks volumes about the effort and time required to scale the business.

Key Differences between Dropshipping and Amazon FBA 

The main difference between dropshipping and Amazon FBA is the availability of inventory. With Amazon FBA, you have to order inventory upfront, which requires significant investments. After you get the inventory, you can send it over to the warehouse. Meanwhile, with dropshipping, you do not need to have inventory to start making sales. Simply put, you won’t need to spend a dollar unless you sell a product. 

Another difference between these two is handling customer service processes. With Amazon FBA, you are not responsible for handling customer service inquiries. However, with dropshipping, you are the one dealing with customer support. 

Finally, when it comes to returns, if you use Amazon FBA, then you won’t have to worry about these either. However, in dropshipping, it becomes increasingly difficult to handle returns, as your customers can’t send the product back to your supplier. 

Which One to Choose? 

It is time to decide which one you want to proceed with. Carefully evaluate all the pros and cons of both options and proceed with the one most suitable for your case. 

If you want to save more time and have resources to invest in inventory our recommendation is the Amazon FBA program. However, if you do not have the initial funds for investment but in fact, you have lots of time, then dropshipping must as well work for you. 

Multiply Your Profits with Amazon 

No matter which business model you end up adopting; you still need to keep a keen eye on your business for it to grow. Suppose your goal is to multiply profits, then you must optimize the management of different aspects of your business. That is when Enso Brands comes to help you. 

Enso Brands offers everything Amazon Sellers need to succeed, from bookkeeping to PPC campaigns. It is an all-in-one Amazon Agency that fosters sustainable growth of your business. The main services include inventory reimbursement, store management, listing optimization, and brand content creation. 

So, if you want to learn more about how we can help your business prosper, click here.