In this article, we’ll discuss the differences between Amazon FBA and Dropshipping and which one is best suited for your business.
What’s the difference between Amazon FBA vs Dropshipping? When selling on Amazon, you may always hear those two words. And now, let’s clear this out and I’ll share with you which one is better.
Topic Rundown:
- What is Amazon FBA?
- Pros and Cons of Amazon FBA
- What is Dropshipping?
- Pros and Cons of Dropshipping
- Amazon FBA vs Dropshipping
- Which one is better?
What is Amazon FBA?
FBA stands for Fulfillment by Amazon and is a service provided by Amazon that handles all storage, order fulfillment, returns, and customer service for Amazon sellers. Quite simply, all you need to do is ship your product on Amazon, wait for it to sell, and let Amazon do the job of prepping and shipping it to the customer.
With this, Amazon has become popular as a way to make money online and I am one of those people who makes money on Amazon. Now, Amazon FBA has so many benefits. And we’ll discuss them in the previous chapters
Pros and Cons of Amazon FBA
Pros of Amazon FBA
Less work
In Amazon FBA, sellers send their inventory to Amazon’s fulfillment centers and Amazon handles the picking, packing, and shipping of the products.
More advantage
Technically, when your products are shipped by Amazon you automatically receive the Prime shipping badge on your listings. Amazon Prime is a special subscription on Amazon wherein products will be shipped by Amazon your customer within a day or two after ordering. This program is a massive hit to so many customers of Amazon across the globe. I mean, who doesn’t want their order to arrive as early as possible?
Being an Amazon FBA seller will help you to gain more attraction since Amazon only caters to Prime products under the FBA program. By selling on Amazon FBA, customers will put more trust in your product when they see the Prime badge.
Customer Service
Amazon will handle all customer service for orders fulfilled by Amazon. If a customer needs to return an item, Amazon will handle the receiving of your returns.
Cons of Amazon FBA
More cost
Amazon FBA fees can become costly depending on the size and weight of your product. In Amazon FBA, we pay fees such as Fulfillment fees, Storage fees, and Referral fees. Aside from these, there are other fees such as the selling plan or in other cases, the long-term storage fees.
Inventory problems
This is rare to happen but there are cases whereby Amazon may lose some of your inventory during their fulfillment process. Now, when this happens, Amazon will reimburse you for the cost of your lost inventory. If you want to know if you have a lost inventory and how to process it, you can watch my interview with Norm Rogers from Seller Tool Kit.
What is Dropshipping?
Before we start, let me give you a disclaimer. If you want to dropship your products while using Amazon as your selling platform, Amazon restricts dropshipping in their platform if you will buy your products from a retailer.
Now, dropshipping is when a seller lists a product for a sale online and has it shipped from a supplier or manufacturer without purchasing any inventory upfront. Dropshipping is a popular business model with Amazon, eBay, and Shopify sellers. As it is easy to get started, you don’t need a significant upfront investment.
Dropshipping Restrictions in their policy
- If the shipment does not identify you as the seller of record or if anyone other than you including the other online retailer appears on packing slips, invoices, or external packaging. They strictly prohibited it without exception.
- Shipping orders with packing slips, invoices, external packaging, or other information indicating a seller's name or contact information other than your own is also strictly prohibited.
A lot of seller from retail stores no longer use this because of these restrictions.
Pros and Cons of Dropshipping
Pros of Dropshipping
Low startup cost
Dropshipping has a low startup cost compared to other business models such as a private label or wholesome. Basically, there’s no ordering products in bulk and spending thousands of dollars upfront.
Easier to start
In Dropshipping, it is easier to get started because you can find products from a supplier and list them on Amazon immediately. The business model is very simple which makes it attractive for starters to use this business model when starting their online selling business. Always remember that Amazon allows sellers to dropship, just be sure to follow their dropshipping policy.
Cons of Dropshipping
More competition
Since it is much easier to start dropshipping, there is also much more competition. According to Grandview research, the growth rate of dropshippers globally is 28%. Experts projected that in 2025, the growth market of dropshipping will be equivalent to $557. This means that competition in dropshipping may also increase as more sellers will dive into this business model.
Slow delivery
In dropshipping, there are times when you will experience slow delivery depending on the supplier or manufacturer you’re working with. Sometimes this is due to lots of demands or unexpected scenarios like calamities which can slow down your deliveries.
Amazon FBA vs Dropshipping
Now, Amazon FBA vs Dropshipping. In simpler terms, the primary difference is stock possession. When you are dropshipping, you don’t own any merchandise and act as a middleman between suppliers and customers. Whereas when you use Amazon FBA’s program, you have to invest in merchandise and store it in Amazon’s warehouse. In return, Amazon takes care of all your shipments and returns.
Which one is better?
When I started for ways how to make money online, I started with Amazon FBA – Online arbitrage. Now, within my years of doing Amazon FBA, I already achieved being a two 7-figure Amazon seller in my Amazon UK and Amazon USA business while living remotely.
Personally, I prefer the Amazon FBA model rather than Dropshipping. There are two things I look at whether it be online selling and dropshipping’s affiliate marketing. All these are heavily publicized niche business models looking to make money. Quite simply, they have no real barrier to entry. You don’t really have to risk anything when you do decide to start which also means that it gets more competitive.
Which business model do you prefer?
Choosing whether Amazon vs Dropshipping depends on your business type and goals. If you are just starting your online business then probably go for the dropshipping business model for it gives you more benefits than the Amazon FBA business model. But if you already have an online wholesale store, then the Amazon FBA business model is more suitable for you. Whatever business model you choose, always make sure that you have the right tools to scale your business.
If you’re interested and want to learn more, you can check our article about how to make money on Amazon online arbitrage. Also, check out how I achieved £1 million in 1 year.