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Amazon FBA vs. Drop Shipping: What’s Better for Beginners?

Which path to eCommerce success is best for beginners?

That’s something I’m asked frequently.  And understandably so.

When it comes to Amazon FBA versus Drop Shipping there are two paths. Should you be investing your hard earned money into product stock that may or may not sell or should you play it safe by selling someone else’s inventory?

And that’s a really good question. Honestly, if I was starting over knowing what I know now, choosing Amazon FBA or Drop Shipping, well, that depends.

If you want the quick answer, Drop Shipping. If I had no money and I was just starting out or if I only had a small chunk of money, that I wasn’t really willing to risk, I would 100% start with Drop Shipping.

But I’m sure you want an explanation, and honestly, either way, you should read this through. When it comes to Amazon FBA, there is a lot of risk involved.

Amazon is a multi-billion dollar business, but if I were just starting out, I would be scared risking my money buying inventory. The difference is, with Drop Shipping you are selling other people’s products. So really, you don’t need to invest a huge amount of money to get started.

You could pay $29 for your first month of eCommerce hosting, and have a profitable store up and running in a couple of weeks, or days if you really pushed for it.

Amazon FBA, on the other hand, is much riskier if you’re just starting out in eCommerce. With Amazon FBA, you have to find a supplier in China and you’ll wire them a pretty chunk of change so they can ship your products to Amazon’s warehouses. Which means you have to pay for warehousing and you can see that it quickly becomes a much bigger operation.

shopify-versus-amazon

There is a great amount of risk involved with Amazon FBA. And as you know, if you are just starting out, you want to keep your risk tolerance very, very low.

So back to the original question featured in the video above, knowing what I know now, which route would I go: Amazon FBA or Drop Shipping. The answer is absolutely no doubt, 100%, I would still go the Drop Shipping route. I would build that business up and make some money while getting data from what I was selling in my store. Eventually, I would start building my own eCommerce brand by importing. And guess what? One of my sales channels would probably be Amazon FBA! Eventually, but not until that point where I was already very profitable with my Drop Ship store.

I hope that answered your question. If anyone else has any questions for me just go ahead and leave them in the comments so I can answer them right away!

Exclusive Bonus:  Want to start a highly profitable, semi-automated, drop ship store even if you've never sold with Shopify, Amazon, or Oberlo?  

Anton Kraly
 

Anton is a the Founder & CEO of Drop Ship Lifestyle - an online coaching program for eCommerce entrepreneurs. He began selling online in 2007 and has built and sold multiple seven-figure businesses while leveraging the power of drop shipping.

  • Charmin says:

    Just a simple question…

    In drop shipping it’s stand out nearly as FBM(Fulfilled By Merchant) model.

    Then how can we achieve the Buy box to go further?

    • Anton Kraly says:

      Hi Charmin, We don’t sell on Amazon. We sell on our own stores so we always have the buy box 🙂

  • MJ says:

    I think a misleading factor in this whole debate is the fact that sure there is no upfront inventory costs for the physical products but the cost of marketing (through facebook etc) will really add up so it does carry risk as well – esp since dropshipping is already saturated to the max and pretty much anything you import from aliexpress is generic and there is already 1000 other people selling it and marketing it that have bigger budgets then you

  • Iesha says:

    I forgot to mention I have no social media account so do I start with this first? This is way I can drive traffic to my online business. Some people start with a facebook page, instagram, and twitter and so many others. What do you suggest at the same time creating a online business?

  • Iesha says:

    Hello
    I am new to the whole online business learning through watching You Tube videos talking about making $10,000 a month ( which I find hard to believe) with Affiliated Marketing, Amazon FBA and Shopify. Well I did a lot of research and thought maybe starting out with Affiliated Marketing and Shopify. You tube guru charge students a %500 – $1,000 and up fee to take a course to show me step by step how to make money. I cannot affordable to take there classes but want to make money can you help and how much do you charge for showing me how to make great revenue.

  • Rufat says:

    Hi. I want to make drop shipping work. I want to put my product to Amazon and when it sold out i will buy product from China… can this work?

  • Concepcion Renno says:

    Drop shipping or fba? This is the question I have been asking myself for weeks….. And your post just helped me make the decision. Thanks for great post!

  • Steve says:

    With AMZN FBA they have warehouses in 22 different states. From a TAX point you need a resellers license from each of the 22 states because you do not know what warehouses AMZN will place your items for sale.
    It’s a tax nightmare UNLESS you sign up for a service to do it all for you which is another $49.95 per month or something. With FBA the charges keep stacking up and up !

    • Jason says:

      The Tax liability issue isnt that huge an issue. You only have a tax liability with the state/s your conduct business from WITHIN.
      As far as I know (several existing Amazon sellers have assured me as well), you can choose what state you wish your products to be warehoused and fulfilled from. This then creates a taxable event with that state alone.
      So if your wishing to minimize your tax, you pick a state with low tax rates to run your Amazon business from.
      Its true, there are apps you can add on to do just about anything with Amazon, some you can pay a lot for. But its often cheaper to fully research what liabilities you will have yourself during your due diligence phase while setting up your Amazon sellers account and then set up in such a way so as to minimize them.
      Amazon actually have real life customer service agents for sellers. After all, sellers are their gravy train with all the fees they extract. Its in Amazons intrest to keep you happy and selling on their platform.
      You can access them through your Amazon sellers hub/portal.

  • Kevin says:

    Hello,
    Very interesting article. Thank you.
    However, does this apply as much in Europe as in the US? As I understand it, one the the main requirements for a successful drop-shipped product is that it has to have a Minimum Advertised Price. Very sensible because it avoids getting embroiled in a price war.
    In Europe, MAP, along with all other price-fixing, is illegal. Therefore, price competition is very keen. So, why would a customer use an unknown Shopify website when they can just go to Amazon and almost certainly get the product cheaper and with buyer protection?
    It is also interesting to note that most Shopify stores are getting very little traffic as can be seen by their Alexa rankings.
    Best,
    Kevin

  • Robert says:

    Hi Anton,
    Great info. I’ve been curious about FBA but also juat using Amazon as a sales channel for my store. Instead of paying for ads and clicks that may or may not convert, is it worth considering selling on Amazon and paying their commission? I’m not familiar enough with it so maybe there are other obstacles.
    Thanks,
    Robert

    • RForillo says:

      Robert,
      When you use FBA you are paying at least three fees to Amazon. Fulfilment By Amazon has these fees, referral (commission) fee, fulfillment fee, and a selling fee (either monthly or $1 per sale). In addition, to these fees, you need to have the product in the first place so Amazon can warehouse and fulfill your order. Also, with FBA there may be another fee if you don’t sell your products fast enough. That fee is short and long-term storage fees.
      When you use FBM, Fulfillment By Merchant, then you pay Amazon the referral fee, plus the monthly or $1 per sale fee. If you buy and resale the product you will still need to pay for warehousing and fulfillment at your own facility.
      The drop ship route eliminates many of these fees, and the need to have your money tied up in products. Why Anton said what he did. There is no right or wrong answer. Having your own branded product “can be” very lucrative on Amazon. You can even have others sell your product for a commission (others are drop-shipping) your product. However, the risk is much higher. You might sink some hard earned cash into a product that turns out to be a dud or defective. With drop shipping, the risk is much less and your reward is also less. Also, with drop shipping, you can learn what products are in demand and turn over quickly. If it is a general product, you then brand that fast moving product.
      You should learn both selling models, as well as a wholesale/retail model. All have their strength and weaknesses.

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