Dropshipping Vs Amazon FBA; The Best eCommerce Business Models Compared. - The Niche Guru

Dropshipping Vs Amazon FBA; The Best eCommerce Business Models Compared.

dropshipping vs amazon FBA

When you’re starting your own e-commerce business, there are a lot of choices to make. Two of the biggest decisions are whether to use dropshipping vs Amazon FBA. They’re both great ways to get an online business off the ground.  But what’s the difference? And which is the better option for you?

In this blog post, I’ll break down the key differences between dropshipping vs Amazon FBA, so you can make an informed decision about which option is best for your business. At the end of it, you will know:

  • What each model is about
  • The Pros of each model
  • The Cons of each model
  • How to start a business or create a website in regards to each model

Ready to get started? Let’s go!

What is the Dropshipping Model?

What Is Dropshipping | How Does Drop Shipping Work? (2022)

Dropshipping allows you to sell products from different merchants on your website. This business model allows you to influence the final cost of the products by setting your price. Therefore, you determine your final commission or profit from every transaction in your online store.

How does the dropshipping model work?

This is an example of how dropshipping works:

  1. You set a price for a product on your website. Let’s say a product worth $20, which you then re-sell for $30.
  2. Your consumer places an order on it and pays your asking price of $30.
  3. You forward the order to the retailer and pay them the wholesale price of $20.
  4. The wholesaler ships the product to your customer, and your sales commission of $10 is yours to keep.
  5. You run your dropshipping store and sell the product on your eCommerce store.
  6. The transaction with your customer is completed at the retail price.
  7. You order the product at the wholesale price from the merchant once the customer has paid you for it.
  8. The wholesale vendor ships directly to your customer, under the impression it has come from you.
  9. You keep the profit.

Dropshipping might be the best business model for you if you don’t have money to invest in the inventory and storage space required by a regular eCommerce business. It allows you to go into business with a minimal budget.

Another advantage of dropshipping is it allows you to test the demand of a product before investing money in storage and inventory.

It is a great solution for entrepreneurs willing to build an eCommerce store.

Pros Of Dropshipping.

Low risk for you since you only pay for a product once your customer has ordered it.
Startup costs are minimal because you only need a website.
You control the price of the product.
You have higher profit margins.
You can build your own brand.
The potential is there for you to expand and even to sell your own products later.

Cons Of Dropshipping.

You need to offer customer support.
You have no control over the product quality or the packaging.
You need to go niche-specific to avoid very saturated markets.
Easy to get lost with inventory issues.

Finding Dropshipping Suppliers.

Getting reputable, verified, and reliable vendors with high-quality products will help you build your dropshipping business. A qualified supplier allows you to have fewer customer service issues.

If the products are high-quality and are simple to understand and use, the chances are that your customers will have less trouble in figuring out how to use them properly. You can therefore direct all your attention to building your brand.  

If you are a newbie in the dropshipping business, you can use these tools to help you get good reputable suppliers:

1. Spocket

One of the main advantages of Spocket is that you can request product samples from your suppliers before deciding whether to import them. This ensures that you end up with the best products, the right products, and those of high quality. Some of the products you can get from the Spocket platform include women’s clothing, bath and beauty products, toys, jewelry, and watches. 

2. Ali Dropship

The Ali Dropship platform is convenient for those who wish to start a dropshipping business with products from the AliExpress platform. Here, you can use an AliExpress dropshipping store or the Ali Dropship plugin to connect to your already existing online store. Some of the advantageous features of the Ali Dropship platform are:

Low Ticket Dropshipping.

When you upload products from a website with questionable services, you may face shipping delays and customer issues.

Also, expect lower sales because of the type of products you are selling. Here you need to push for volume if you want profits, so expect to implement aggressive and costly business marketing.

High Ticket Dropshipping.

This is the best way to build a sustainable business because you use established brands and distributors.

As opposed to campaigns where you actively target people, you target customers actively searching for your products, so you don’t have to create traffic. You have a more considerable profit margin and a very reliable supply chain.

Building A Website For Dropshipping.

You can either build your dropshipping website using WordPress and WooCommerce or take the easier option of using an eCommerce platform like Shopify.

Shopify is easy to use for a flat monthly fee and integrates with automation and email marketing tools, making it easier to reach customers.  It is the most popular option used by drop shippers.

With WordPress, you may pay less but need to have a better understanding of how it works. Therefore, there is a more significant learning curve, and you will need to put in a bit more effort to create your eCommerce store. However, you have much more control and can implement different marketing strategies.

There are more pros than cons to owning a dropshipping website, but minimize any risks by researching products well before selling them.

My personal advice is to use a dedicated tool for finding the best dropshipping products to sell. Check my review about Spocket vs Oberlo, which are currently some of the best dropshipping services.

What is the Amazon’s FBA business model?

Amazon FBA is not very different from the dropshipping model. With the Amazon FBA, also called Fulfillment by Amazon (FBA), the products are manufactured by your supplier and then sent to an Amazon fulfillment center. The main difference from the drop-shipping model is that the storage, shipping, and customer service activities are all taken care of by Amazon. 

How does the Amazon FBA model work?

how amazon FBA works
  1. The first step is to get a reliable supplier of high-quality goods. 
  2. Then, you can ship these products to Amazon’s warehouses, where Amazon workers get to fulfill your clients’ orders as they receive them. Amazon provides customer service on behalf of your business.
  3. Like dropshipping, you are in charge of listing the products you are selling online through the Amazon platform. The trick here is to get products at affordable prices and sell them for a profit. This is because the Amazon platform charges a commission of 15% on the product’s selling price.

Pros Of Amazon FBA.

 Amazon FBA is a stress-free, hands-off model.
 You get to take advantage of Amazon’s reputation.
 You get to enjoy great features on Amazon like Amazon Prime or free shipping.
 There are fewer customer service issues on your end.
 The Amazon FBA model allows you to set your prices, so you can have higher profit margins.
 You do not need a physical location.

Cons Of Amazon FBA.

There is a higher cost associated with setting up an Amazon FBA business than dropshipping.
Inventory management is challenging.
You get to depend on the Amazon platform.
It is highly competitive.

How To Start an Amazon FBA Business?

1. Buy an Existing FBA Business.

If you want to start with the easiest method, you can simply buy a shop that already has products, has a customer base, and is profitable. This won’t be cheap, but at least you are guaranteed it will work.

You can use Flippa to find ready-to-go Amazon FBA websites.

2. Hire a Freelancer.

Another quick method and incredibly affordable would be to order an Amazon FBA website on Fiverr. There are many people specialized and price start from only $100.

So this is probably the easiest way to get started. Moreover, your freelancer can also help you find the best products to sell. So this is would probably be my to-go option for beginners.

You can click here to find specialized Amazon FBA services.

3. Starting an Amazon FBA Business from Scratch.

If you have some experience or want to adventure by yourself, you can also create your Amazon FBA business from scratch.

Here is the process to follow when setting up an Amazon FBA store:

Step #1. If you aren’t registered to sell on Amazon already, you’ll first need to create a Professional Seller account.

Step #2. Once the account you have created is activated, you should list the products you plan to sell. Click on the option that reads “Inventory,” then click on the option that says “Product.”

Step #3. After that, browse for the category that matches the product you wish to sell and click the “Select category button.”
Choosing the most suitable category will help buyers find the products they need more quickly.

Step #4. Fill in all the required information, click “Save and finish” to complete your product listing process.

Step #5. Choose Amazon FBA as your preferred Shipping Method.

Step #6. At this point, the products you want to be shipped should be prepared, packaged, and labeled the way you want them by your supplier. 

Step #7. Sending your Items to Amazon closes out the process.

Wrapping up Amazon FBA

Amazon has connections with many companies that offer discounted shipping incentives to FBA customers. This means you will get to enjoy a more effortless and faster shipping process. 

Some of the areas where Amazon FBA centers are found in the United States include Arizona, Arkansas, California, Colorado, and Georgia. Once your products reach your preferred Amazon Fulfillment centers location, they’re stored and ready to be shipped to the client’s destination.  

When a customer places an order on your Amazon store, they will pick, package, ship the product to your customer. You will only need to sit back and follow the tracking of your shipment going to the customer.

Amazon charges storage fees that range from $0.15 to $137.32. The fee mainly depends on the number of days of storage, size of the time, weight, etc. These fees also cover the cost of shipping.

Dropshipping vs Amazon FBA: Which is Better?

So, after carefully evaluating the pros and cons of both dropshipping vs Amazon FBA, which option suits you best?

If you can afford to invest a substantial of money upfront, the Amazon FBA business model will work great for you. This capital will be used to purchase products from reliable suppliers. You are guaranteed to benefit from the large, ready customer base that Amazon provides for you. Last but not least, you spend considerably less time on the business as there are little to no customer queries to deal with.

However, if your budget is very limited and you want to have full control over what you sell and how you sell it, dropshipping is your option.

Generally, both business models are an excellent choice for anyone that wishes to set up an online business instead of a physical store. They both allow you to make passive income and they have impressive scalability. In light of the numerous benefits and downsides of each model.

Now it is your turn!

Will you be creating a dropshipping or an Amazon FBA business?

Leave a comment with your answer below.

Dropshipping vs Amazon FBA- Which business model is better to make money online in 2022? Check pros, cons and differences in this complete article comparing these eCommerce business models. #dropshipping #AmazonFBA#businessmodels
Want to know the difference between dropshipping vs Amazon FBA to start a profitable eCommerce business? Check this article and find pros, cons, and which one is better to start a profitable niche website, how to start from scratch and more! #nichewebsite #dropshipping #AmazonFBA


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