Amazon FBA vs. Dropshipping: Which Business is Right for You

Amazon FBA vs. Dropshipping: Which Business is Right for You

Are you thinking about selling your own products online? Then you’ve probably heard of the terms Amazon FBA and dropshipping. Both models offer you the opportunity to sell products online without having to worry about tasks such as storage and shipping. We will help you decide which business model is right for you.

Amazon FBA, dropshipping – what is that anyway?

  • What is Amazon FBA? “FBA” is the abbreviation for “Fulfillment by Amazon” and means that a sale is processed via Amazon. So you offer your goods for sale on the marketplace and store them in Amazon’s logistics centers. As soon as a user buys your product, it is shipped by Amazon. Payment and possible returns are also processed via the online giant. It differs from Amazon FBM (“Fulfillment by Merchant”), where the merchant takes care of shipping and returns themselves.
  • What is dropshipping? According to PaulSourcing, Dropshipping is also known as drop shipping. You usually sell the products in your own online shop. If a sale occurs, as a dropshipper you forward the order to the manufacturer, who then packs and ships the goods. In this case, you act as an intermediary between the customer and the manufacturer.

Advantages and disadvantages of Amazon FBA

Amazon FBA has made selling goods much easier for sellers. As a retailer, you can concentrate on selling your products (e.g. optimizing listings, placing advertising, improving products), while Amazon takes over the complex processing of sales.

Advantages of Amazon FBA

  • Low effort: FBA makes selling on a marketplace like Amazon surprisingly easy.
  • FBA advantages: If you use FBA, you benefit from certain advantages as an Amazon seller. This includes, for example, the Prime logo, which your product receives and thus appeals to an even larger customer group.
  • Reach: Amazon’s reach is enormous. Amazon is the first port of call for more and more online shoppers. If your product can be found there, you directly address customers who are ready to buy.
  • Internationalization: Offering your products on other Amazon marketplaces is possible with just a few clicks.

Disadvantages of Amazon FBA

  • No customer contact: Amazon wants to offer its customers the best shopping experience and therefore offers very accommodating customer service. As a seller, you only have a few contact options with your customers.
  • Competition: The competition on Amazon is huge. As a seller, you have to take the right measures to make your business successful and not get lost in the crowd.
  • Capital: Compared to dropshipping, a higher capital investment is possible with Amazon FBA. You have to pre-finance the goods, which is not the case with dropshipping.

Advantages and disadvantages of dropshipping

The biggest advantage of dropshipping is the low start-up capital required to start your online business. But the business model offers other challenges that should not be underestimated.

Advantages of dropshipping

  • Capital: As mentioned, the goods do not need to be pre-financed. Only when an order is received in your shop do you forward the order to the manufacturer.
  • Effort: Dropshipping also eliminates complex tasks such as storing and shipping the goods. But the remaining effort should not be underestimated.

Disadvantages of dropshipping

  • Reach: While Amazon is visited every day by tons of users ready to buy, this doesn’t just happen in your online shop. You first have to build the shop and make sure that your target group becomes aware of you.
  • Quality control: With dropshipping, you don’t have your goods in your own hands before they are sent to the customer. You must therefore have a trusting relationship with your supplier and, if necessary, carry out random quality checks.
  • Delivery times: Dropshipping products are often ordered from Chinese portals such as Aliexpress. This can result in long delivery times, which also have to be communicated to the customer.
  • Customer service: While with Amazon FBA you have relatively little direct contact with the customer, with dropshipping you have to take over the communication yourself and also act as an intermediary between the customer and the manufacturer.

Is dropshipping allowed on Amazon?

Both Amazon FBA and dropshipping come with some advantages and disadvantages. Some retailers come up with the idea of ​​combining the two. In this way, Amazon’s reach could be used by offering the products there but shipping them directly from the manufacturer to the customer (via FBM, so to speak). But Amazon prohibits this approach in its direct delivery guidelines.

Conclusion: FBA or dropshipping – which business idea is better for you?

Whether Amazon FBA or dropshipping is the better choice cannot be said across the board and must be considered individually. From our own experience, we recommend starting with Amazon FBA because the business scales well and Amazon’s customer potential can be used. Dropshipping can be started with little experience and capital, but the marketing effort behind it should not be underestimated.

Amazon FBA vs. Dropshipping

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