Trying to decide between dropshipping vs FBA?
It’s a decision so many new ecommerce entrepreneurs try to make because both dropshipping and FBA are radically different. There are people who have been successful at both, but the real question is which one you’re most likely to be successful with.
Now, I can tell you there’s a clear answer.
However, I’m going to go through the most important differences between each so you can decide which one is best for you. This includes everything related to products, marketing, and overall potential of each path.
So let’s talk about it…
Dropshipping vs FBA: Overview
Dropshipping and Amazon FBA are radically different from each other.
Dropshipping is basically when you sell a manufacturer’s product and they ship it for you. For example, let’s say you’re dropshipping shirts. With dropshipping, you’re not doing any sort of branding whatsoever. You’re literally buying shirts under the manufacturer’s brand and selling it for them. They get the notification and ship it for you.
Beginners are attracted to dropshipping because there’s no inventory and costs are low.
Amazon FBA stands for fulfillment by Amazon. Basically, you get to send your own inventory to an Amazon warehouse and every time someone buys your product from Amazon, they ship the inventory for you. Typically, these will be private label or custom products you’re selling. In other words, you would come up with your own brand of t-shirts, put up a listing on Amazon, send your shirts to an Amazon warehouse, and once someone buys your shirt, Amazon ships it.
Beginners are attracted to FBA because Amazon can potentially supply all of your traffic.
Dropshipping vs FBA: Products
The right suite of products can build a multi-million dollar ecommerce business.
With dropshipping, you have two factors. You’re selling a product that is not in any way exclusive, special, or unique. In fact, it’s not even your product. This leaves you with just selling whatever everyone else sells. This then leads to higher customer acquisition costs, lower profit margins, and just overall harder time of selling your products. All without any sort of ownership. Plus, you can spend $1MM and still never build any sort of brand.
At the same time, it costs you $0 to start selling.
With Amazon FBA, you’re pretty much selling private label products. Generally, private label products are higher quality than dropshipping products. The smarter sellers will ask for customization of those products, which then can lead to an exclusive offering that is under your unique brand. This leads to lower customer acquisition costs, higher profit margins, and an overall easier time of selling your products.
The only problem is that it can cost anywhere between $2,000-$10,000 to start.
Dropshipping vs FBA: Marketing
At the end of the day, traction is what makes or break a business.
With dropshipping, you have to supply all of the traffic. Whether it’s advertising, influencers, content marketing, or something else… you have to handle it all the entire way. The good news is that it’s your traffic and data. For example, if you sell 100 units of coffee to 100 customers, you now have 100 people you can always email again to buy more. This is what makes direct-to-consumer so powerful.
With Amazon, you need to supply some traffic to jumpstart the Amazon SEO flywheel. Once that flywheel starts to turn though, then it’s like opening a floodgate of traffic. You can build a 7 figure Amazon business essentially without paying a dime for most of that traffic. The bad news is that you own nothing during the process. Amazon can always ban your listing and they give you none of the customer data. It’s a place to make sales, not build a brand.
Dropshipping vs FBA: Potential
Overall, both dropshipping and Amazon both have potential.
With dropshipping, it’s relatively easy to scale in terms of product. Because you don’t have to worry about any of the logistics, all you have to do is make the sales. This is great because logistics is the #1 problem ecommerce business owners face as they scale. Plus, you get to control how much money is spent in your marketing. The problem is that it’s much harder to scale a dropshipping business due to its much higher costs.
With Amazon, you’re getting direct access to the world’s #1 ecommerce search engine. There are thousands of 7 figure Amazon businesses popping up every year due to the sheer amount of people who do most of their shopping on Amazon. In the long run, it’s much cheaper to scale an Amazon business than it is a dropshipping business. However, you will have to deal with logistics. This will force you to have to deal with cash flow management, which can potentially hinder your growth if you don’t manage your money correctly.
If you just want to start an ecommerce business to learn, go with dropshipping.
It’s the perfect way to start selling stuff online with minimal risk.
However, if you want to build a strong, profitable brand that is more likely to work and will help you quit your job, then start an Amazon FBA business. At the end of the day, Amazon FBA allows you to create a unique brand with exclusive products, while tapping into Amazon’s stream of customers. It’s not the perfect business model, but it can become the foundation to something even bigger.
Dropshipping just forces you into selling commodities.