Difference between Amazon FBA and Dropshipping

When you’re just starting out, it may feel like there are a million ways to sell online. There are several ecommerce strategies, each with its pros and cons. Some sellers have their own warehouse and ship the products to the buyers. Some sellers choose to dropship their inventory directly from a third party (3PL) supplier. Others use FBA (Fulfilled by Amazon) or a similar service like vendor fulfillment to sell their goods on Amazon. There is no optimum solution for everyone, but understanding the pros and cons of each strategy will help you decide how best to get your products into the hands of customers.

What is Dropshipping?

Dropshipping is a form of retail business where a marketplace accepts orders from customer without keeping inventory on hand. Dropshipping is a fulfillment method in which a marketplace does not keep the product they sell in stock, but instead purchases the item when an order is placed and has it shipped directly to the customer. The marketplace is not at risk for a product being returned or left in their inventory. Since store owner never has to touch the product, they don’t have to worry about finding a place to store. This saves a lot of time and money and allows the seller to scale their business much more easily. Dropshipping is a great way to start a business with a low investment and minimal capital. It also allows would-be entrepreneurs to test the waters with a very small financial risk. The cons of Dropshipping are that you are dependent on your suppliers’ shipping times, fulfillment times, and customer service.

Amazon FBA (Fulfilled by Amazon)

FBA is a fulfillment method in which a seller sends their inventory to an Amazon fulfillment center for storage and distribution. Once the inventory is in Amazon’s warehouse, Amazon will fulfill the order when a customer purchases the item and ships it directly to the customer from amazon’s warehouse. FBA is a very popular fulfillment method, especially for sellers who are selling larger quantities of their product, as they will often get a percentage off of the shipping costs. Amazon also guarantees that the inventory will be stored in a safe and secure environment, which can be especially important for certain, types of products. If a product is returned to a seller, they will have to pay to ship it, which can be costly and time consuming. If a product is returned to Amazon, they will decide whether to send it back to the customer or destroy it. The biggest advantage to using FBA is that Amazon’s logistics team has years of experience. They will be able to get your inventory to customers faster and more efficiently than you could ever hope to. There is no doubt that Amazon is an excellent eCommerce platform and there are plenty of reasons to use it for your business.

Pros of Dropshipping

  • You don’t have to spend money on inventory up front.
  • You don’t have to spend money on storage.
  • You don’t have to spend money on shipping.
  • You don’t have to spend money on customer service.
  • You don’t have to spend time sourcing your inventory.
  • You don’t have to worry about fulfilling orders.

Cons of Dropshipping

  • You will always have to wait for your inventory to be shipped to you.
  • You will always have to wait for a supplier to ship your inventory to you.
  • You will always have to wait for your customers to receive their orders.
  • You will not be able to guarantee that your product is genuine.
  • You will have no control over product quality.

Pros of FBA

  • Your inventory will already be at the nearest Amazon fulfillment center.
  • Amazon will shipping your inventory to customers.
  • Amazon will be shipping your inventory to other fulfillment centers.
  • Your customers will be able to get in touch with Amazon.
  • You will be able to guarantee that your product is genuine.
  • Amazon will be able to monitor your products for quality.
  • You will be able to accurately track your sales.
  • You will be able to accurately track your ROI (return on investment).

Cons of FBA

  • You will have to pay for your inventory to be shipped to Amazon.
  • You will have to pay Amazon to store your inventory.
  • You will have to pay Amazon to ship your inventory to customers.
  • You will have to pay Amazon to destroy your inventory.
  • You will be depending on Amazon’s logistics team.

Amazon Seller Central and Vendor Fulfillment

Seller Central is Amazon’s multi-seller e-commerce platform. Vendor fulfillment is a fulfillment method in which you send your inventory to Amazon’s warehouse. Once the inventory is in the Amazon’s warehouse, they will fulfill the order when a customer purchases the item and ships it directly to the customer from their warehouse. Vendor fulfillment is a very popular fulfillment method, especially for larger accounts. Vendor fulfillment is a great way for larger sellers to save money on shipping costs.

Summary

Every method has its pros and cons, but if you want to start a successful online business, then you need to choose the method that is best for you. If you have just started, then it is best to choose an easier method that does not require as much capital. Once you have been successful with this method, then you can expand your business and add more products to your portfolio.

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