The Comparison of FBA and Dropshipping

There is fierce competition in every retail environment. In order to be successful, you need a unique product, a better price or a business plan that stands out. This is the same when using online platforms such as Amazon for running your online retail business. There are a variety of business formats that Amazon sellers can use including FBA and drop shipping. When creating your retail business plan, it is important to choose the proper format for the success of your online store.

What Is Amazon FBA?

This is the most common format for many sellers. You package your merchandise, print the labels, complete the inventory on the Amazon app and send it to an Amazon fulfillment center.

There are some benefits to using FBA:

  • You are no longer responsible for shipping to the customer. Amazon will pick it, pack it and ship it.
  • There is greater trust seeing an Amazon label package then a blank box. There is also the trust that Amazon will deliver in a few days (with some exceptions), where a private shipper may not be able to ship for a while.
  • When things go wrong, Amazon will handle all the customer complaints and returns.

What Is Dropshipping?

The easiest way to describe dropshipping is you are the middle person. Ultimately you have a vendor (for example, a company selling shoes). You create your retail store featuring their items. Amazon buyers see the product they want and order them. The order is then shipped from your supplier to the customer. As far as work goes this is the easiest model to use and there are many benefits.

  • Being the middle person means that you are not buying bulk inventory. There are few upfront costs (there will still be some Amazon costs).
  • You do not have to be creative and design your own product, you are simply selling someone else’s.
  • Amazon has a good drop ship policy.

This seems like a simpler method then FBA but there are some drawbacks to this. The first is that you have no control over your inventory. With the current supply chain concerns, inventory can be a worry. Dropshipping also removes control of shipping, including when it will be shipped or the packaging for shipping.  Additionally, most drop shipped products are common and the competition can be greater. One of the ultimate fears is that this is not your product and you have no control of quality that is coming from the vendor.

Each business is unique and needs to decide what model is the best. How much control do they need in quality or inventory? Does shipping time matter and what are the actual costs for either method? Both are viable options for your online store.

Wizards of Ecom is a great source for ecommerce learning and tips.

Carlos Alvarez

Alvarez sums up his mission to help online sellers with a quote he heard early on in his career. New sellers constantly compare their Chapter 1 to another seller’s Chapter 20. They see what other veteran sellers are doing and they judge their success and failures by this benchmark. His goal is to show sellers a realistic path to success, and how they can enjoy every chapter of their own, unique journey.

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