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

Will a beginner in eCommerce find the best success ​with Amazon FBA or drop shipping? 

That’s something I’m asked a lot. It’s a great question.

To choose between Amazon FBA or drop shipping on Shopify, there are two ​questions you need ​to ask yourself: 

  1. Should I be investing my hard earned money into product stock that may or may not sell? 
  2. Or play it safe and sell someone else’s inventory?

Here’s the quick answer; the best path to success (for beginners) is drop shipping.

If I had no money, and I was starting an eCommerce business or if I only had a small chunk of money I wasn’t really willing to risk, I would without a doubt start ​making money online with ​drop shipping.

I know you're probably expecting an explanation​ to my reasoning. To understand why, you should read this article through.

Learn How To Start & Grow A Hyper-Profitable Online Store Without Needing Inventory Or Existing Marketing Experience

Amazon FBA vs. Shopify

For Amazon FBA, a lot of risk is involved.

Amazon is a multi-billion dollar business, but if I were just starting my eCommerce business, it would scare me to risk losing my money buying inventory.

The difference with drop shipping is you’re selling other people’s products. ​So you ​do not need to​ invest a huge amount of money to get started.

The Drop Shipping Path

By picking drop shipping you could pay $29 for your first month of eCommerce hosting, and have a profitable store up and running in two or three weeks​. ​Days even, if you pushed hard enough.

Now, the most used platform used for an eCommerce store for drop shipping is Shopify.

No, it’s not the only platform, there are other options. I however, think ​Shopift has​ the best platform for drop shippers​. Building ​those stores is what I teach in my courses.

​There are certain techniques and strategies you should use if you want ​an eCommerce store. One of the most important first steps is setting up an eCommerce store. ​Doing this will open other opportunities during later steps.

The Amazon FBA Path

Amazon FBA has a much greater risk involved if you’re just starting out in eCommerce. With Amazon FBA, you find a supplier in China. Next you’ll wire them a large chunk of change, and they’ll ship your products to Amazon’s warehouses.

Because they store your product in Amazon’s warehouse, it means you must pay for that, too. As you can see, the costs add up.

Let’s face it...There is a significant amount of risk involved with Amazon FBA. 

The most important thing to remember when just launching an eCommerce business: You want to keep your risk tolerance very low!

shopify vs fba amazon

​The answer in choosing drop shipping or Amazon FBA for someone beginning in eCommerce is simple. With no doubt or hesitation, the answer would be to choose the drop shipping path.  

It is important to remember that Amazon FBA is not a bad platform.

In fact, after you have worked to fine-tune your eCommerce business using drop shipping, the use of Amazon FBA can help increase your profitability.  

While you are using ​Shopify for your drop shipping store as the only platform, it gives you the opportunity to gather useful information on marketing and customer service.

The information can help you make smarter business decisions. ​As always, your focus is to have an eCommerce business that is the most profitable.

Depending on what your goals are, at some point you may decide the best choice for meeting your overall goals is selling your business

During that decision process, you will evaluate your business to determine how much it’s worth and take the appropriate steps to sell it.

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

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.

  • Phillip DeMarco says:

    With dropship I sell on Shopify(at my price then re-emburse the supplier) How much does Shopify charge? Could Shopify then market on Amazon for themselves?. Regards Phillip De Marco

    • Anton Kraly says:

      Hi Phillip, If you accept payments with Shopify payments they charge .30 cents per order + a 2.9% transaction fee (for the credit card processing fee).

      And do not worry. They will not sell your items on Amazon or anywhere else.

  • Ileana Herring says:

    Good article. Thank you 🙏🏻

  • Anton Kraly says:

    Hey Everyone,

    As many of you already know I created Drop Ship Lifestyle after selling a network of eCommerce stores and then trying to find a community of other store owners to network with… What I found was a bunch of scammers who promised newbies they would get rich quick by following their push-button systems!

    This lead me to create a new community along with an online training program that shares how to build a REAL online business.

    I’d love to hear what you think… it’s a 2.5-hour training designed to help you drop ship profitably… all for free.

    Be sure to click here to check it out and send me your feedback!

    If you go through the “How To Start & Grow A Hyper-Profitable Online Store” webinar and still have questions just contact me and I will help you out.

    • Farhan Jabbar says:

      Good article… Worth Reading!

  • Lucy Samuel says:

    Thank you so much for providing something so useful!

  • 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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