Online business models such as drop-shipping and Amazon FBA (Fulfillment by Amazon) seem to have a similar appeal to those seeking semi-automated, location-independent incomes
You have most probably come across such headlines stating ‘ Learn the secrets of how this 15-year-old kid is making millions using Amazon FBA after dropping out of school’. And similarly, ‘This 70-year-old grandma is earning millions as a drop-shipping expert by sitting on her bed’. It can be difficult to judge which of these business models is right for you when people have made their fortunes using all these different business models.
Our goal is to help you determine which is right for you by discussing the pros and cons of drop-shipping and Amazon FBA. And so you need Amazon PPC management services in FBA? Although they may operate similarly and provide you with similar results, they also have some key differences that may help you choose which one to choose.
In this article, we will guide you in developing selling strategies, refining and improving your store outlet, optimizing your store listings on Amazon and other E-commerce platforms, Amazon PPC services, and Amazon account management services.
What is Drop-shipping?
When your customers place an order on your website, the products are shipped directly from the supplier to them.
The products are sold to your customers at a retail price online, and once an order is placed, you order them from a wholesaler. Your product is sold to a customer, who then orders it from the supplier, and you profit from the difference between the price you spent and the price you received. The business model is simple and does not require inventory. Rather than purchasing items beforehand, you simply sell them to customers.
We will be using this definition of Drop-shipping in this article. There will be no discussion of FBM (Fulfillment by Merchant), which is a form of drop-shipping on Amazon. Drop-shipping is permitted by Amazon, but there are some strict policies for doing so, which means you are not selling from your website.
Pros and Cons of Drop-shipping
Pros
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No upfront inventory costs
There are several advantages to drop-shipping, including the ease of launching your own business and not having to purchase many products in bulk to begin.
Customers can buy existing products directly from suppliers. Your order is placed with the supplier after receiving payment from the customer. After receiving payment from the customer, the supplier ships the order to the customer.
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No shipping of products required
Your supplier will ship the products to your customers for you, so you do not have to do anything. You only need to focus on managing the front end of your website and making sure your supplier receives the orders. The supplier will handle everything related to packaging and sending products, so you won’t have to.
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Low costs and requirements to get started
Additionally, there are very low costs and requirements to start selling right away since there is no inventory to buy upfront. Drop-shipping requires nothing more than a web presence. You can list and sell products online once your website is up and running and approved by suppliers.
Many people with little experience in this area might find it difficult to set up a website, but there are many options such as Shopify, BigCommerce, and WooCommerce.
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You can drop-ship almost anything
When you search for certain products on eBay or Google, you will find many sellers for nearly any product. The majority of these sellers are drop-shippers, and you can choose from a huge selection of products that are available from suppliers around the world.
Cons
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It takes more time and effort than people advertise
You will most likely need to open a business bank account and payment processor when operating a drop-shipping shop, because it is a real business. Aside from the e-commerce website itself, there are a number of other requirements for getting started.
Then, after setting all that up, you will have to contact suppliers and try to get their cooperation. This is not always easy, and many suppliers are unwilling to cooperate.
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No existing customer base
Among Amazon FBA’s major advantages is the chance to sell products to Amazon’s customer base. It is only necessary to supply the products they search for on Amazon. Customers are already looking for products to buy. Drop-shipping doesn’t have an established customer base; you have to pay to entice people into your website. Once the visitor has arrived at your website, you must then convince them to trust you and ultimately give you their credit card information.
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It’s highly competitive
Drop-shipping not only has low margins, but can also be very competitive. There may be other drop shippers working with the suppliers you deal with as well. Each of those drop shippers is competing with the same customers and using the same tactics. It may seem difficult to establish yourself in the market when you take all of these factors into account.
What is Amazon FBA?
Can Amazon FBA be compared to drop-shipping? The similarities lie in the fact that you do not physically fulfill orders, but there are also some major differences. Amazon Fulfillment by Amazon, better known as FBA, allows you to ship bulk quantities of products to Amazon’s warehouses, either directly or indirectly, via an international manufacturer of your choosing. Your inventory is housed in Amazon’s warehouses and Amazon takes care of picking, packing and shipping to your customers once you receive an order
The purchase is made without the need to create a website, collect money for the purchase, create a fulfillment center, handle customer service, and handle returns. Amazon handles the entire order and shipping process when a customer orders your product from the site.
Pros and Cons of Amazon FBA
Pros
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A strong customer base
Millions of people are ready to purchase your products when you sell on Amazon.
You can expect a steady stream of customers looking to buy your product if your product ranks for keywords customers are searching for. It’s not quite the same as convincing people to buy from you or driving traffic to your store.
Amazon’s reputation and goodwill are part of what you sell when using FBA. It is third-party sellers who list their products on Amazon as sellers. Many Amazon customers are unaware of this fact.
They know they can trust Amazon to provide them with whatever they need. It takes a few days for a box of goods to arrive from Amazon after they type in what they’re looking for.
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Very little work to maintain
Maintaining an FBA business is very easy. Your products are handled almost completely by Amazon once they are in their warehouse. There is very little work involved in running a business daily besides keeping your inventory stocked.
To run an Amazon business, you don’t need to quit your job. You could find that having a job income is a huge advantage because it allows you to keep the money in your business and reinvest it later to build up your income.
Cons
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High initial costs
Amazon FBA costs a lot of money to get started, and this is one of the biggest obstacles to getting started. Buying enough inventory of your first product requires a moderate amount of capital. It could take a long time for your first product to make money, or you may not succeed with it
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You are reliant on one platform
Amazon is the only place where you will earn all your income and run your business. If you break their rules, your account could be suspended and you could lose everything you earn.
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You can lose your business if you run out of inventory
Having insufficient inventory on Amazon is considered a cardinal sin. No sale will be generated if your inventory runs out. Those who don’t sell their products will have their rankings drop until they are ranking behind products with inventory in stock and are getting sales.
Conclusion
After reading this guide, you should understand everything you need to know about drop-shipping or Amazon FBA. They are both viable methods of making money online and depending on your circumstances, one may be more appropriate for you than the other.
People who want to start their own online business but have a minimal budget can benefit from drop-shipping. Amazon FBA provides an amazing opportunity to earn significant income online with very little effort, but it’s not for everyone since it requires at least $5,000 to get started.
Whatever you choose between the two, Urtasker can assist you in getting recognition and sales at your store. Urtasker is a strategic consulting agency that helps its clients both on and off Amazon.