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Dropshipping vs FBA: Which One Should You Choose for Your Amazon Store

August 03 2021 11:46
Winnie

The world of ecommerce today is expanding more than ever. With every passing day, you hear newer terms related to online selling or any kind of business via the internet, and it does not seem like this perpetual progress will end anytime soon. That being said, the two buzzwords we hear a lot nowadays and Dropshipping or FBA, i.e., Fulfillment by Amazon. They have taken the entrepreneurship community by storm, and more and more people seem to be developing interest in both of these.

Now we understand that despite both of these being a very good option, most people will be able to opt for only one, at least initially. Given the sensitivity of this matter, the choice of dropshipping vs Amazon FBA will be quite hard for many. We will aim to discuss both of them in quite detail; detailed enough for you to decide for yourself by the end of this article.

What is Dropshipping?

Dropshipping is a retail business where the seller does not keep any goods with themselves, nor do they have any sort of storage space. It may be weird when you think of it: “How do they sell when they have nothing to sell?” When looked at realistically, the dropshipping seller does not really own anything. Instead, they may have a website where they display certain products, and when anyone buys those products from them, they buy them from Amazon and sell it ahead, thereby keeping some profit.

Now some may assume that it’s nothing but a scam, but that’s not technically true. In fact, they are marketing a product and selling it on the behalf of the individuals that own this product, and in effect helping their business grow as well. This is mostly for Amazon sellers that do not have a strong marketing strategy and plan for themselves.

What is Amazon FBA?

Another sort of fascinating online business is via Amazon FBA. The term FBA literally means fulfillment by Amazon, and as the name suggests, it is a process wherein an Amazon seller can send their products to Amazon’s warehouse (or a fulfillment center), and the company takes care of the rest, including the shipping and its charges. Therefore, in essence, you could consider it the polar opposite of dropshipping.

As you can see, Amazon FBA is like normal selling, but it reduces the tasks you have to perform, and your workload, significantly. This puts you at an advantage since you are free of extra headaches. In the long run, it proves to be a profitable business just like dropshipping we discussed above.

Now the most important question arises: which one is better? Dropshipping vs FBA is not a walk in the park, because we have to consider a lot of circumstances that will help us reach the right verdict, and that will be the topic of our discussion in the next section.

Dropshipping VS Amazon: Pros & Cons

Dropshipping vs Amazon FBA has been a difficult topic to deal with, as they are only recently become mainstream, and it can be hard for people to understand the benefits each of them holds. Note that only time will tell the true nature of both, as what could be good for one may be bad for the other, and that’s something we absolutely do not neglect when carrying on this discussion.

Pros of Amazon FBA Over Dropshipping

Following are the advantages of Amazon FBA has over dropshipping:

1. You Have a Huge Profit Margin

While doing business with Amazon FBA, you make huge profits when compared to dropshipping, as all the products you are selling are originally yours, and you can make a good deal of profit out of them, minus Amazon’s negligible service charges. On the other hand, you cannot keep a huge margin in dropshipping as customers will opt out of buying from you.

2. Reduced Administrative Tasks

Other than shipping your products to Amazon’s fulfillment centers, you won’t have to oversee the procedures of handling orders, packing, and shipping. This gives you more time and energy to grow your business, and will also play a role in saving additional costs. In the long run, if you feel like your business is good enough that it would be profitable for you to handle these tasks yourself, you can easily switch.

3. Your Business is More Scalable

If you see success at any point in Amazon FBA, you can just increase the stock of any product or the type of products you are selling. This is good because this subsequently leads to more sales, and you can increase and expand your FBA business even further. A dropshipping business, on the other hand, is not quite scalable because you lack control of the supply chain, and may not get enough customer attention.

4. You Know the Products You are Selling

Being a dropshipper, it is hard for you to know the quality of the products you are selling, as you haven’t examined them yourself. Even if you check a sample, it gives no guarantee about the other products in the stash. Therefore, if you end up selling faulty products, it will backfire on you. As an Amazon FBA, however, you will have examined all the products yourself, so you can rest assured concerning their quality. This will protect you from serious harm.

Pros of Dropshipping Over Amazon FBA

Following are the advantages of dropshipping has over Amazon FBA:

1. You Can Start with a Low Budget

Typically, to start off with Amazon FBA you need to have a huge budget, even if you are selling few products. However, that isn’t the case with dropshipping. The products you are selling aren’t even yours, so that saves you a lot of costs. Therefore, if you are starting off with very little wealth in your possession, you still have chances of success that may go a long way.

2. The Risks Involved are Lower

If the price is lower, then the damages in the case of loss are pretty low too. Unfortunately, when you are starting a business, it’s more than likely to fail, as to make it a successful one requires experience and expertise. Nevertheless, you can always start dropshipping from scratch if the previous attempt fails, whereas in FBA you will have to face big losses. In some cases, the damages become unrecoverable.

3. More Choices with Products to Sell

You cannot buy all kinds of products and sell them on the internet, but you sure can advertise all the products you like. Therefore, you have the choice of selling a greater variety of products via dropshipping, even though they may not be yours. If one product doesn’t sell well, you can start advertising another one, and another until you finally reach a product that sells well. In FBA, however, it’s not feasible to change the products you are selling every now and then.

4. You can Run Your Business Anywhere

A dropshipper on Amazon stands as a broker between the customers and the product. Therefore, they do not require any sort of physical presence and can do their work from any part of the world. In FBA business, on the other hand, products can be sent to only a few warehouses that exist within the individual’s locality, so they lack the option of running their business anywhere. That’s because being somewhere else may increase their initial shipment costs.

Cons of Amazon FBA

Following are the downsides of going for Amazon FBA:

1. The Competition is Too High

Competition in FBA is way too high. As there are so many sellers selling amazing and unique products on Amazon, it can become hard for you to stand out. While getting recognition may change your life forever, you are more likely to remain hidden from the spotlight. You may need the “I will never give up!” attitude to work this out.

2. Most People Cannot Go for This Option

It’s worth considering in the Amazon vs FBA debate that not everyone can go for this option. You need to have an ample budget, and you need to be in a position where you can take risks. A lot of problems stand in your way if you go for it anyway, otherwise. It’s up to you to determine if the risk is worth it.

3. The Losses Will Be Big

Loss every once in a while is common for any business, with Amazon FBA being no exception. Since the investment, in this case, will be huge, the losses will have to be as big. This will put you in a very bad position, especially if this is a new business, and you will have no way to know if a loss is coming your way if you had initial success.

Cons of Dropshipping

Following are the downsides of going for dropshipping:

1. Hard to Become a Big-Shot

While initial success in a dropshipping business is easy, it may be hard for you to make exceptional profits and expand your business to a multi-national level. This is certainly not easy with Amazon FBA too, but when seen comparatively, FBA sure has the upper hand in the dropshipping vs Amazon FBA dilemma.

2. The Journey Maybe a Little Longer

The longer the journey the more ups and downs you will face, and consequently the tiring it will get. The same goes for your journey as a dropshipper. With your products being sold via dropshipping, it will take plenty of time for you to generate enough revenue to take your business a step further. This may put you at a disadvantage in many respects.

3. Maybe Hard to Sell Good Products

We’ve discussed before that in dropshipping you do not examine all the products yourself, which puts you in a very bad position. It makes you more susceptible to fraud and people exploiting your position. You will have to be very careful about the products you buy, and it may be harder to find the people you trust.

Conclusion

We have thoroughly discussed the pros and cons of both dropshipping and FBA for your Amazon store. To many degrees, they give us a good idea on which one of both would be the better option for us given our individual circumstances and inclinations. However, which one is better overall is an entirely different question, which may not even have an answer. Nevertheless, let’s attempt the final verdict.

If I have to give an overall score in the dropshipping vs Amazon FBA game, it will probably go to dropshipping. That’s because most people out there may not have the budget to sell products consistently via FBA, and they are better off starting small. However, if their dropshipping business becomes a success, they can easily add or switch to FBA if they think the time is right. Vice versa may be hard because of the effort required for establishing a dropshipping.