January 4

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Amazon FBA vs Dropshipping: Which is Better?

By Rob Palmer

January 4, 2020

amazon fba

Make the right choice to set yourself on course to rapid success in the highly-profitable world of eCommerce.

What You Will Learn

  • The pros and cons of the Amazon FBA model
  • The pros and cons of the dropshipping model
  • How to combine the two for maximum success

The Titans of eCommerce

The eCommerce industry is growing at a phenomenal pace worldwide, taking business away from traditional bricks & mortar stores. While retail store chains are closing down, or struggling to catch up with the tech revolution, online sales are exploding.

The eCommerce market will grow to over five trillion dollars by 2022, continuing the impressive growth rate of the last few years.

If you want to get a slice of this enormous revenue pie, then there are many different business models you can choose from. But two stand out as being the most popular and effective way:

  1. Selling with Amazon FBA
  2. Dropshipping from your own online store

So which is the better way to go? Of course, there is no simple answer to this question, as there are many different factors involved. But we can make a comparison of the pros and cons of each model.

But before we get into that, let’s take a look at how the two options work.

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The Amazon FBA Model

Two thirds of the products sold on Amazon are not offered directly by Amazon, but are presented by ordinary people like you and me. Amazon CEO, Jeff Bezos, cheerfully admits that these third-party sellers are ‘kicking our first-party butt’ in terms of sales volume and growth.

You can sign up as a seller with the Fulfillment by Amazon program, popular known as Amazon FBA. Here’s how it works:

  • Find a great product opportunity (easy with the right tools)
  • Source your product and ship it Amazon (simple when you know how)
  • List your product (Amazon sells the product and processes the orders)
  • Get paid twice a month by Amazon (like clockwork)
  • Reinvest some of your profits and scale your business

The Dropshipping Model

The other popular eCommerce model is dropshipping. Here you create your own web store online, using tools and platforms such as Shopify and WooCommerce. The main difference is that you are responsible for managing all aspects of the transaction, from finding customers and taking payments,  to shipping products and handling customer service. 

Here’s an example of how the model can work. You need to:

  1. Find and source your product
  2. Store your products at a third-party warehouse
  3. Create your online store
  4. Advertise to attract customers
  5. Process the orders yourself
  6. Arrange for the products to be shipped
  7. Deal with customer service issues

The eCommerce Model Showdown

Both of these models are absolutely viable, and people are making millions of dollars with both options (and endless variations of these models). But there are definite strengths and weaknesses with each that you should consider before diving in.

You need to consider the advantages and disadvantages of each and make a decision as to which way you should go. The choice will ultimately depend on your own personal circumstances and preferences.

Amazon FBA Pros and Cons

The Amazon FBA model certainly has a lot going for it, and it’s easy to see why so many entrepreneurs choose this option. When you sell through the Amazon Marketplace, you benefit from:

  • Direct access to hundreds of millions of Amazon customers
  • An audience of active buyers who are ready to purchase now
  • Amazon’s amazing selling machine (1-click ordering, etc.)
  • No worries about warehousing, payment processing or shipping
  • The huge amount of trust that buyers have in Amazon

These are certainly fantastic reasons for choosing to sell on Amazon. But as with any business model, there are downsides, too. When using this platform, you need to be aware of the following. You are:

  • Putting all your eggs in the Amazon ‘basket’
  • At the mercy of Amazon’s decisions and changes
  • Missing out on sales through other channels
  • Forced to comply with Amazon’s rules and restrictions
  • Likely to face stiff competition from other sellers

Dropshipping Pros and Cons

So how does the dropshipping model hold up by comparison? There are pros and cons with this model, too—and they are often the mirror image of those that affect Amazon FBA.

When considering the dropshipping model, you enjoy many advantages. You will:

  • Own and control your own online store
  • Have the freedom to sell through multiple channels
  • Face few restrictions on how you build your brand
  • Enjoy the flexibility to do things your own way
  • Avoid Amazon FBA’s referral fees

Well, that all sounds great, right? But hold on a moment, you also have to consider the disadvantages. You will also have to worry about these downsides:

  • There is no ready-made audience of active buyers
  • You must invest heavily in advertising and promotion
  • Everything from payments to shipping is your responsibility
  • You miss out on Amazon’s powerful sales tools
  • You start with zero brand recognition, trust or authority

Getting the Best of Both Worlds

If you are serious about building a business based around your own private-label brands, we suggest that a hybrid of both models is the best way to go. That way you can get the benefit of both models, whilst mitigating the downsides of each.

We recommend Amazon FBA as the best way to start a private-label business. Because Amazon does so much of the hard work for you, this is a relatively painless way to create a brand-new business.

Start by creating and sourcing one product, and then selling that through Amazon FBA. You can then add more products, and start building your brand.

At this point, you should consider adding dropshipping as a second way to offer your products to the world. This will reduce your dependence on Amazon, as well as opening up many new channels to sell your products.

When you put both models together, you have a fantastic opportunity to build a very valuable business. Make a start today, and you could own a multi-million dollar brand just a few years from now.

If you want to know how to set yourself on the road to success with private-label products, be sure to watch our free presentation. You will discover how to escape your day job and turn your annual salary into your monthly income. Just click below to start:

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Rob Palmer

About the author

I help people start and grow highly-profitable Ecommerce stores, so they can turn their annual salary into their monthly income and live the life of their dreams.

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