Sellers are faced with a tough decision when and where they want to start their e-commerce business; Amazon FBA or Shopify Dropshipping? Both have their advantages and disadvantages that some newbies might not be familiar with.
Although there are many other online platforms for selling your products, you can think of Amazon FBA and Shopify as the two giants in the industry.
If you’re thinking of starting a dropshipping business, then it’s important to know the pros and cons of Amazon FBA and Shopify Dropshipping so that you can make an informed decision about which platform will work best for you.
Amazon FBA has some clear advantages over Shopify when it comes to shipping fees, return policies, and customer reviews but if your goal is simplicity or more control over what products you sell on your store, then Shopify might be the better choice.
It’s a matter of preference but whenever you are starting your business, it’s always important to know the pros and cons of both services so that you can make an informed decision.
The article below will help you find the difference between Amazon FBA VS Shopify Dropshipping and the right e-commerce platform for your business.
What is Amazon FBA?
Amazon’s FBA program is a service that allows you to sell your goods on Amazon’s online platform. Selling products on Amazon can be profitable if you’re able to source a product that’s in high demand.
Amazon FBA has made it possible for small businesses to sell on Amazon with much less investment than before; you simply purchase your inventory from the supplier, list it for sale on your seller account and they will ship it directly to your customers.
With the FBA service, Amazon will handle the warehousing of your products and shipping so all you need to do is fulfill customer orders. You can let Amazon ship items from your home or from a warehouse.
The FBA program also allows you to ship products that are already in stock and can be shipped directly to Amazon, so it is an excellent choice if you want to take advantage of the company’s shipping fees. The other alternative is that your items will not be available for free shipping.
This method is great for those who already have traffic to their website or social media accounts and can generate sales with minimal effort. You will also need Amazon branding on your site so that potential customers can visit the Amazon store through your links as well.
However, it’s not all smooth sailing due to the nature of Amazon. Amazon has hundreds of millions of users and chances are they won’t be interested in what you’re selling even if it does fit their needs perfectly.
So there is a lot of competition for every niche and products must be priced at the right level to attract buyers.
For example, a book is sold on Amazon for $24.99 and has an estimated sales rank of 100k+ BSR (Bestseller Ranking). That means there are currently over 100,000 books that have been selling better than yours so far.
If your product’s sales rank is below this number then you will struggle to generate any profit from it because your sales will be few and far between.
It’s possible to sell on Amazon with a low sales rank but it can be difficult unless you are selling an exclusive product, such as clothing or jewelry, or if you already have traffic coming to your own website. This is where FBA comes in handy since Amazon will be handling all of your orders.
Related Reading: What is Amazon FBA: Complete Amazon FBA Guide in 2023
How to Start Selling on Amazon with FBA?
Amazon FBA is pretty straightforward and easy to set up if you’re already selling on Amazon and just want to expand your reach.
All you have to do is sign up for Amazon’s FBA service on their website, list your items, ship them to their warehouse using the Fulfillment by Amazon program, and they will ship it out to your customers.
It’s also a good idea for you to put some of your profit back into the business in the form of more inventory or advertising so that you can continue scaling up. You can do this by investing in better products or promoting the store through paid social media ads.
Once you’ve reached a certain number of sales, it will be easier to scale the store up organically through Amazon’s search engine and also rank higher on organic searches.
What is Dropshipping?
Dropshipping is a business model through which entrepreneurs purchase goods from wholesalers and retailers and sell them to consumers without ever handling the merchandise themselves. Entrepreneurs often use their personal websites or online shop to sell items.
Shopify dropshipping is a great way to start an eCommerce business from scratch without having to spend much money upfront; this type of business does not require any upfront investment, except for your online store theme, domain name, and web hosting package.
It’s easy to use, and there are various tools and applications that enable you to quickly set up your online shop and start making sales.
In Shopify dropshipping, sellers don’t have to worry about receiving and storing merchandise in their physical store. When an order comes through on the seller’s website, it will be sent to their chosen supplier/factory and the product will be shipped under the seller’s name.
Shopify dropshipping stores can be created using a number of features like product collections and automated fulfillment. These functions make it easy to create online storefronts that are simple to use and manage.
Shopify is the best eCommerce platform for beginners to use as it has everything you need to create an online shop and start selling products. It’s also easy to set up, requiring only basic knowledge of Shopify or eCommerce platforms in general.
How to Start Selling on Shopify Dropshipping?
One of the easiest ways to start selling on Shopify dropshipping is to find high-quality products that are in demand. The best places to look are Aliexpress and Alibaba which are both online wholesale stores.
You need a basic understanding of how Shopify operates, including how to use its backend and what features and functions are available when you sign up for an account.
I recommend watching some YouTube videos, as this will help you get used to the interface and show you what tools can be used to create your store from scratch.
With this type of business model, it’s important to have good-quality pictures of the product, so customers know exactly what they’re buying. It’s also important to have high-quality descriptions of the product, as this will help you convert sales.
Amazon FBA vs Shopify Dropshipping: What’s the Difference?
The main difference between the two is that with Amazon FBA, the merchant has to send their products to Amazon’s warehouses where the items will be stored until sold.
With Shopify dropshipping, the store owner will not have to do anything other than find the products or suppliers and set up their shop so customers can buy online.
In terms of ease of use, Amazon FBA is easier as you don’t have to deal with any wholesalers or other intermediaries. Shopify dropshipping requires a lot of research, so if you’re not too technically savvy, it may be difficult to set up and oversee your store.
However, Shopify dropshipping is great if you want to get a business up and running in just a few days as there’s no need to wait for the products to arrive or go through any other complex procedures.
There are some cases where an Amazon FBA business and a Shopify dropshipping store may be run together. In this case, you can use your online store to attract new customers, while sending them to Amazon for the actual purchase.
Amazon FBA also has a reputation for being more expensive than Shopify dropshipping, but this doesn’t necessarily mean it’s not worth the extra cost as your products will have access to Amazon’s large existing traffic.
However, if you’re on a budget and looking to sell your products cheaply or at cost, then Shopify dropshipping is the perfect solution for you.
The bottom line is that Shopify dropshipping and FBA both have a place in online selling since they offer solutions that are better than each other in certain aspects. It really just comes down to personal preference.
The Pros and Cons of Amazon FBA
Pros
Traffic
Amazon is the largest marketplace in the world and has more than 300 million active users. There is no other platform with such a wide audience. So if your business is still in the early stages and there isn’t a lot of traffic to your website, Amazon FBA can be a great option for growing your brand.Inventory Storage, Packaging, and Shipping Included
The biggest advantage of selling on Amazon is that you no longer need to worry about storage, packaging, and shipping. Amazon handles all of these things for you which means you can focus on sourcing products instead.Multi-Channel Fulfillment
You can set up multi-channel fulfillment, which means that when customers make a purchase from any of your e-commerce platforms, you have the option to ship it to them using Amazon FBA.Ready-Made Brand Reputation
If your brand is new, you can leverage the reputation of Amazon and its A+ rating to generate sales. This will give your business an established reputation at a low cost.Online Store Easy Set-Up
Amazon FBA is one of the easiest ways to create an online store. The platform offers a range of pre-made templates and themes that can be customized with just a few clicks, saving you time and money. Amazon also helps set up shipping rates between multiple countries for international sales, and courier selection, and it handles tax information in each country.Built-in Customer Service, Refunds, and Returns:
Amazon acts as a buffer between you and your customer, so if there is an issue with the product or your order then Amazon will deal with it instead of you dealing directly with the customer. This reduces the amount of time and money required to run your business. Amazon FBA also provides customer service and returns. One of the best ways to build a reputation on Amazon is by providing excellent customer care and this is built into the platform.Easy To Master Platform Interface:
The Amazon FBA platform has a clean interface and is easy to navigate. There are also guides and tutorials for sellers to learn how to use the system effectively.
Cons
Large Competition:
Amazon is a large marketplace and as such has a lot of sellers. Many products will be similar to yours, especially since FBA covers only a limited range of products. This will make it hard to stand out and make sales.Few Layout Design Options:
Amazon FBA only offers a few pre-made themes for your store. This will make it hard to create a unique image and brand identity.Difficult To Have Your Own Branding:
It is very difficult to have your own branding on Amazon FBA. Your store will look like every other and it is hard to include any information about the company behind it. This makes it hard for customers to trust you or remember you, which may make it harder for them to make a purchase.Transaction Fees Of 15% to 40%:
Because Amazon charges 15% to 40% depending on the product category, there is a large chunk of profit missing from your sales. The only way around this is to focus on high-priced items or use coupon codes.Difficult Shipping Preparation:
If you’re selling a lot of products, then it will be hard to keep all of your shipments organized. Shipping can easily become overwhelming which may affect your business.Easy Customer Returns:
Amazon has a no-questions-asked return policy which means that customers can easily return your product. This may affect your reputation and ability to make sales as most consumers usually trust Amazon products and will believe you are selling faulty goods if they receive a defective item.Difficult Tracking Inventory:
Amazon FBA is an easy platform to use, but it can be difficult to track inventory. If you are new to Amazon FBA, you may not realize that the system will only track tracking with SKUs. When items have an SKU, they are easier to keep track of and monitor.Customer Support Not User Friendly:
Amazon’s customer support is not very easy to use. If you encounter an issue with a product, then it can take a long time for them to respond and make things right.Customer List Not Accessible:
Amazon does not allow you to see your customer list, which means that it will be hard for you to follow up with them and increase the number of repeat customers.
A downside is that your products are also listed on the same page as other merchants with similar listings, instead of being hidden inside an online store with its own URL (like Shopify stores).
Your products will be shown when people search and buy them directly from Amazon, which prompts buyers to compare the prices and eventually opt to get the cheaper alternative.
The Pros and Cons of Shopify Dropshipping
Pros
Free 14-Day Trial
Shopify has a free 14-day trial so you can test out the system before opening an account. You only pay once your store is up and running on the marketplace. This makes it easy to try out the platform and make sure you are happy with the performance before paying for anything.More Than 70 Easy To Use Templates:
Shopify has more than 70 different pre-made templates so you have a lot of options when creating your own store. This helps you to easily create a professional image for your brand and sets it apart from others in the marketplace.Create Your Customized E-commerce Website:
You can create a customized e-commerce website through Shopify which will make it easier to have a unique image and brand identity. This can help you stand out from the competition, especially if you are focusing on creating products that are better than your competitors.Easy To Create Own Branding:
You can easily create a unique brand through Shopify which will make it easier for you to have information about who is behind the e-commerce store. This makes it easy for customers to trust your business and make repeat purchases.Different Tools And Apps Available:
Shopify is not just a marketplace for drop shippers, you can also use Shopify to sell your own products and create an online store. This adds versatility to the platform which makes it easier to expand your business in the future and keep things organized.Quality Seller Support
Shopify has a great seller support team that is ready to help out with any problems or issues with your account. You can always get in touch and expect an immediate response from the team.Accessible Customer List:
Shopify allows you to access your customer list so it will be easier for you to follow up with repeat customers and increase the number of new sales.High Level of Security:
Shopify offers a high level of security to ensure that your business is safe. All payments are secured through SSL encryption and all financial information is protected by a secure network.
Cons
Monthly Fees:
Shopify charges a monthly fee for using the platform, although if you are just selling your own products or dropshipping you can get away with paying a cheaper monthly fee. However, if you use Shopify to do product development or other kinds of work on the side then there are other fees that may come up depending on what services you are using.Paid Apps For Most Features:
Most of the apps you can get on Shopify are paid, so they may cost extra each month depending on what features you want to add. This is standard for most marketplace platforms and it means that you could end up spending a lot more money in the long run than if you had your own custom website set up through a web hosting service.No Professional Reporting on Basic Package:
The free Shopify package does not include professional reporting which could make it harder to track your business performance and how well you are doing compared to competitors.Not Available In Other Countries:
Shopify is only available to businesses based in the US, UK, and Canada which means that you will not be able to open up a store or use Shopify if you are based somewhere else.Manage Your Own Storage and Fulfillment:
If you want to use Shopify to sell your own products you need to set up a fulfillment center and storage facility for the products. This means that you will be responsible for storing, shipping, and delivering the orders yourself which can make it more difficult for new business owners who do not have experience in this area.Handle Your Own Customer Service:
Shopify does not offer any customer service choices for the basic package. However, you can get premium customer support through different third-party providers including Zendesk and Salesforce that can help provide a little extra security when dealing with unhappy customers.Low Conversion Rate:
Shopify does not give you the ability to customize your landing page which can mean that conversion rates will be lower for new customers who are unaware of what they should do once they get to your Shopify store.More Apps, Slower Website:
Shopify is used by more than 300,000 businesses which means that you are going to be sharing your server space with a lot of other users. This can slow down your own website and make it harder for customers to reach the checkout page before they become tired of waiting and leave your store.
A downside is that you are responsible for running your own website, or at least managing the hosting and the security. Shopify is not a website builder like WordPress or Wix, it’s an online store builder so you’ll have to build the rest of your site using third-party providers or coding services.
Also, if something goes wrong on your website that’s not related to dropshipping (i.e., hacking) then you are going to be the person who has to deal with it since Shopify does not provide any tech support for basic users.
Which is Better For Beginners?
As a beginner, it is hard to know what e-commerce platform will work best for you. It really depends on your business goals and how much time and money you are willing to invest into it.
You also have to take into consideration what kind of features and support your store needs in order to make it successful, as well as the amount of time and money that you’re willing or able to spend on this endeavor.
Of course, if you have the money and resources then use both Amazon FBA and Shopify. If you don’t have the money or resources to start with both, then pick one and focus on developing that until it’s seen some real growth then you can start to branch out with your second platform.
Another thing to note is that Shopify offers a 14-day free trial that you can sign up for and use to familiarize yourself with the platform before you make any kind of commitment. Amazon does not offer any sort of free trial, although they do offer paid options depending on what type of account you want to create.
Amazon FBA is more well-known than Shopify, so it attracts a lot of traffic but also people who are interested in selling on Amazon, which means more competition. On the other hand, Shopify is not as well-known so it attracts less traffic and may be easier to reach the top of the search results.
Your success will really depend on how you are as a seller, and how much time and effort you are willing to put into either of the platforms as both Amazon FBA and Shopify dropshipping have their advantages and disadvantages.
As far as customer service goes: both businesses will require you to occasionally go above and beyond for clients in order to maintain a good reputation and keep your business thriving.
It’s just that Shopify does not offer any kind of support or help with this process while Amazon offers its own customer service team who are ready to assist you whenever you need them to.
At the end of the day, it’s important to remember that both e-commerce platforms can help turn your business dreams into a successful reality. Factors like your budget, how much time you have to devote to this, and the features that are important to you will factor into your decision.
Ultimately, it’s up to you to decide what will work for your business in the long run and it really comes down to what kind of seller you want to be, what kind of experience you want for yourself and your customers, and how much time and money each model is going to cost you in the long run.
Final Thoughts
Amazon FBA is still the eCommerce giant but you need to know about their Achilles’ heel, shipping costs, and review system before deciding that would be your best bet overall in terms of getting ahead in business.
Shopify dropshipping can be an excellent alternative to Amazon and other platforms but you need to make sure that you have a well-thought-out business plan in place if you want it to succeed in the long term.
Keep in mind that Amazon FBA and Shopify Dropshipping can be used at the same time which is a great opportunity for anyone who has not committed themselves to one of the models. It is a great way to build a diverse business.
Overall, Amazon FBA is still the best option for businesses and Shopify is better for those who are just getting started. So if you are looking to start a business or add on to an existing one then it would be smartest if you tried out both methods before committing completely to either one.
The most important thing that you can do for your business is to keep an open mind. There are many different opportunities out there, but they might not fit into the box that you initially thought about when deciding which type of business you wanted to run.
You never know what could become your next big idea if you look at every opportunity with an open mind and do not restrict yourself to just one type of business plan.
Still not sure how to succeed on Amazon FBA? Be sure to check my Amazon FBA course and find out how I can help you scale your Amazon business.