If you are trying to decide what business to start between dropshipping vs FBA, you’re not the only one. Ecommerce has grown exponentially in the past couple of years.
After the pandemic, more and more people realize that building an offline business is not such a good option as it seemed. That’s because you are at the mercy of the government who puts restrictions in place.
In the online world, nobody can force you to close your business. That’s because customers buy products from the comfort of their own house.(1)
Dropshipping and Amazon FBA are the most popular business models in regards to ecommerce. However, there are some differences that you need to know before you decide which one to choose.
There are some entrepreneurs that have been successful at both (like yours truly), but in the beginning it’s better to choose only one of them.
After you start getting some traction and automate some of the workflow, you can have fun and start another business. So … which one is better? The most honest answer that I can give you is: both.
What I mean by that is that both of them can be very profitable. But none of them is better than the other. The question you should be asking is: “Which one should I choose?”
Well, if you want to find out what the answer is, you’re in the right place! By the end of this article, you will have a much better understanding on what online business you should start.
Dropshipping vs FBA: Overview
Amazon FBA and dropshipping are quite different. With dropshipping, you don’t even see the product that you’re selling (if you don’t want to).
It’s a very cool business model that allows you to sell products from manufacturers. The manufacturer ships the product to your customer in the moment when someone makes an order on your online store.
For example, if you sell hoodies. You will just need to put pictures with the hoodies on your website and drive traffic to your offers.(2)
When a customer buys a hoodie from your website, the manufacturer then packages the hoodie and ships it to their house. Most people are attracted to this business model because you don’t need to invest money in inventory.
Your only job is to bring people to your store, and the manufacturer does the rest.
On the other hand, Amazon FBA is quite different. You will need to buy bulk products and send them to a warehouse (which belongs to Amazon).
Also, as opposed to selling items from your website, you will post listings on Amazon. When someone buys one of your products, the Amazon employees will package it and ship it to your customer’s location.
Amazon FBA is great because you sell your products on the Amazon platform. Meaning that the traffic is already there.
As we all know, Amazon is the most popular website on the planet. So, you will not need to invest money in paid ads.
When it comes to ecommerce, the biggest challenge beginners face is finding good products to sell. That’s because there are a ton of bad suppliers that they run into.
No matter if you choose dropshipping or Amazon FBA, I highly suggest trying SaleHoo. It’s the platform that I use to find good suppliers with quality products.
The good part about dropshipping is that you don’t need to spend money upfront for products. As mentioned above, you sell products that you don’t even own.(3)
BUT that doesn’t mean you can sell random stuff. If you want to build a legitimate business, you need to sell quality products. That’s because you want your customers to come back to your store and buy even more products.
On the other hand, if you choose Amazon FBA, you will need to invest a couple of thousand dollar in inventory. Therefore, you can’t really afford messing it up.
Traffic is the bloodline of any online business. As you can imagine, that’s the case with dropshipping and FBA as well.
With Amazon FBA, you need to provide the algorithm what it wants. If people click on your listings enough times, Amazon will push you up in the rankings, allowing you to get more traffic.
The good part is that you don’t need to spend much money on driving traffic. The bad part is that Amazon can decide at any time to ban your account for no reason.(4)
You might think that they can’t do that or you will sue them if they do. You want to sue Amazon? Good luck!
On the other hand, with dropshipping you will need to pay for traffic. Most people (including me) drive traffic with Facebook ads.
That’s because Facebook is really good at targeting the right type of people. With Facebook ads, you are able to bring the customers who are most likely to purchase your products.
Also, once those people end up on your store, you will be able to collect their email addresses. Not only that you make sales, but you also capture leads in order to make more sales in the future.
Both of these business models have a very good income potential. Obviously, it all comes down to how much effort and money you invest in it.
Amazon can be really profitable, as you sell products on the biggest website in the world. However, you will continuously need to deal with bulk products.(5)
You always need to have products on stock, otherwise you’re going to miss out on a ton of sales. You will always need to handle your logistics carefully, as you’re spending a lot of money on products.
Dropshipping can be scaled at a very high level, especially if you get good at Facebook ads. Once you hit the right ads, you will just need to invest more money in them.
The best part about it is that there is no additional effort in doing this. Also, if you collect leads on your website, your profit margins will increase even more, as you will have traffic that you own (on your email list).
Dropshipping vs FBA: Final Thoughts
Both dropshipping and Amazon FBA are very profitable business models. If you want to start an ecommerce business, I would definitely suggest you choose dropshipping.
That’s because you will not need to spend money on bulk products and risk thousands of dollars. There’s nothing worse than buying products and needing to sell them for cheap.
Work with suppliers from SaleHoo, as they are much easier to deal with. Finding quality products should be your #1 priority in the beginning.
Also, consider learning Facebook ads, as they can be really profitable. If you have the budget, I highly suggest investing in Commission Hero, as it’s the best Facebook ads training out there. Once you get good at running ads, you will always make money.