In the world of e-commerce as a seller, it’s important to have a diversified portfolio. Two of the most popular names are Amazon and Shopify.
We’ve seen time and time again that Amazon FBA is king and dominates the online shopping industry. But does this guarantee success for every seller? The answer is not so simple.
In this blog post, we’ll discuss the pros and cons of each platform, our personal experiences, Is It Better to Start Amazon FBA Before Shopify? and what we think may be the best direction for you.
Even if you have been selling online for a while now and want to expand to either Amazon or Shopify, read on!
Pros of Amazon FBA
Massive Customer Base
When you are selling on Amazon through FBA, your products become Prime eligible, and Oberlo has reported that there are currently 150 million Amazon Prime customers in 2021, and there are probably millions more that aren’t subscribed to Prime.
Since Amazon offers a very wide range of product categories, it makes the platform a one-stop-shop, which is why the customer base is so large.
Time-saving FBA Model for Sellers
For sellers who use FBA, their products are stored in Amazon’s Fulfillment Centers, and Amazon picks, packs, ships, and provides customer service all on their behalf. This is a huge time-saving perk for sellers because it means they don’t have to worry about systemizing and managing their own shipping process.
They can use this saved time to focus on more important responsibilities, like developing new products, finding ways to improve sales, and growing their business.
Multichannel Fulfillment
FBA sellers are not limited to selling their products through the Amazon platform. They can use the inventory stored in Amazon’s fulfillment centers to fulfill their orders on other e-commerce platforms. This way, they don’t have to worry about finding a place to store the products that are meant for selling on other platforms.
Fast Transactions for Customers
Customers flock towards Amazon because of the fast-paced order fulfillment through Prime Delivery. Depending on the item and location of the buyer, Prime Delivery can provide one-day or even same-day delivery. Only FBA sellers on Amazon can bring this experience to customers.
On other platforms, customers wait a long time for their order to be delivered, usually between 3 days to one week.
Convenience in Starting Store
Amazon FBA has made it very simple for sellers to start their storefront. All they really have to do is create their listings, send their inventory to fulfillment centers, and they can start receiving orders anytime.
Easy Inventory to deal with Inbound shipments
On Seller Central, sellers can easily create a shipping plan for upcoming shipments of inventory to fulfillment centers. These shipping plans ensure that products are constantly in stock in the right quantities based on how fast the products sell. Sellers can also see their inventory levels and sales trends in the Inventory Dashboard.
Customers Trust Amazon
When customers browse on Amazon, they don’t hesitate to try out a new product or brand. They put their trust in Amazon to only allow reputable brands/stores to sell on the platform. Sellers can use this to their advantage to prevent the need for establishing that trust from scratch. Because even if their customers do run into any issues, they know that Amazon provides a positive customer service experience.
Easier Returns and Refunds
Amazon takes care of returns and refunds on behalf of the sellers. This makes the selling experience much easier because a seller won’t have to worry about personally coordinating and dealing with frustrated buyers. If a seller personally deals with frustrated buyers, they might receive negative seller feedback if they don’t handle it properly.
Access to Sales Reports and other Data
It is easy to request a report from Amazon for conversion rate, a number of sessions, items that were visited, items that were bought, and much more. You can use this data to understand which listings you need to optimize, products that are selling well or poorly, and make informed decisions from there on what needs to be done to improve the business.
Related Reading: What is Amazon FBA: Complete Amazon FBA Guide in 2023
Cons of Amazon FBA
High Seller Fees
Fees vary depending on the category of the product, but many Amazon sellers complain of an influx of fees to deal with. Account fees, fulfillment fees, sales fees, advertising fees, and other additional fees.
Restricted Products
To keep the platform a safe place, Amazon has declared Restricted Products. Some of them are rightfully restricted because they are dangerous and/or illegal items. However, many categories for decent and safe items are gated, yet getting approval from Amazon to sell them can be difficult. You can read about Restricted Products on Seller Central’s Help page.
Competition in Product Ranking
There can be thousands of sellers who sell similar or the same products as you, and this competition can make it difficult for your products to appear at the top of search results. Buyers don’t typically spend a lot of time browsing through several pages of search results.
It can take a significant investment in advertising to get products to rank higher, especially when competing with more established brands. Sometimes you are not even competing with other sellers, but you can be competing with Amazon themselves because they have their own line of products called Amazon Basics.
Lack of Customization to Storefront
Amazon does not provide many options for sellers to customize their storefronts. Sellers are stuck with the same few templates like everyone else. The best that sellers can do to make themselves stand out creatively is by uploading quality A+ Content on each product listing.
Labeling Shipments
Inventory headed towards fulfillment centers needs to be properly labeled. This can be time-consuming, and errors will be a headache for both you and also for Amazon’s warehouse workers because of their extremely fast-paced logistics process.
Sellers have to put labels for the FNSKU, product name, and its condition. If you can, have your factory do this process for you to save you time.
Low Margins and Lower Pricing
When using the Fulfillment by Amazon model, it can be difficult to achieve a high net margin because pricing is controlled to a certain extent by Amazon. The platform has a Marketplace Fair Pricing Policy, and they also recommend sales prices by comparing the items to competitors.
All sellers on all platforms should have the integrity to price their items fairly regardless of any policies. However, sellers who have a goal of higher profits may feel frustrated by restrictions on how much they can profit from their items.
Returns Hurt a Seller’s Business
Amazon has made it very easy for customers to return items. It is free to return items and they have 30 days to do so. Because of this, there is a higher chance for sellers to get more returns on Amazon than they would sell on another platform that has a more complicated returns process.
Difficulties Tracking Inventory
When your inventory is being transferred between multiple fulfillment centers, you may want to keep track of it so that you are aware if they get delayed or even get lost. Ensuring that you properly label your packages can prevent problems like this from happening, because Amazon’s systems get updated when the packages get properly scanned for tracking purposes.
Seller Support Quality is Inconsistent
There are instances where sellers experience long delays in getting seller support, sometimes they have to send the same information over and over again before getting proper assistance, their agents don’t seem to be trained properly, and overall the experience can be greatly improved.
Dark Tactics from Competition
When the competition can see that you are ranking well in the Best Seller’s Rank, they can get jealous and try to take the spotlight away from you. Some go as far as leaving poor reviews on your products, posting false claims in seller feedback, and even reporting your account.
This is not as much of a problem on Shopify because the competition is not accessible on the same website as you, and Shopify does not have a ranking system similar to Amazon’s for products under the same categories.
Suspensions and Closed Accounts
On any platform, it will be important for sellers to follow rules to continue selling. However, Amazon is much stricter when it comes to policies and guidelines. It can be easy for sellers to get suspended or even shut down on Amazon if they are not careful, even if they violate a policy even by mistake. Many sellers even claim to be suspended or closed down unexplainably.
No Access to Customer List
When someone buys from you on Amazon, you don’t get to establish a relationship with them or contact them to promote new products or inform them of discounts. If you gain regular customers, it will be from their own efforts to regularly check out your store. On Shopify, you have more access to the information of customers.
Pros of Shopify
Free 14-Day Trial
Shopify allows you to get a feel of if they’re right for you before you commit. You will just need to choose a monthly plan during this time, however, you won’t be charged until the end of the free trial period. Once you have chosen a monthly plan while on your free trial, you will be allowed to start selling products or services.
Wide Range of Customization
Shopify comes with templates and themes to choose from, so you don’t have to worry about designing it yourself or hiring someone to design it. If you do build a store yourself, there are several different elements and sections to choose from, which can be placed on the page in all kinds of ways.
App Marketplace
Like the App Store or Google Play, Shopify has its own set of apps that makes the selling experience much easier. There is a wide range of apps, such as email marketing, social media advertising, creating a FAQ, customizing a Thank You page for customers, accounting, inventory management, and much more.
Ability to Sell In-Store
Shopify is good for businesses who want to sell products in physical stores as well as their online store. They have an app called Shopify POS (“Shopify Point of Sale”) that helps sellers easily do transactions and manage inventory tasks for their physical store or pop-up shop.
Brand Identity
On Amazon, buyers don’t tend to recall the stores they bought from because they mainly put their trust in Amazon. On Shopify, buyers put their trust in you. If you want to have independence from a platform and establish your own reputation, having a Shopify store is a great way to do that. It can be a lot of work to build this reputation on your own, but if your goal is to become a familiar name, it can all be worth it.
Quality Seller Support
We have observed that Seller Support of Shopify is much more trained than Amazon’s support. They have more access to the necessary data to help sellers with their concerns, and it’s an overall more positive experience. They can be contacted by Phone, Chat, or Email.
Access to Customer List
The complete opposite of the Amazon experience, Shopify allows sellers access to information on their customers. With this information, you can observe if your products do well for a certain demographic, contact customers for new product launches or discounts, and overall create a closer connection to those who support your brand.
High Level of Security
When transactions are involved, online security for both sellers and buyers is crucial. Shopify’s team takes care of any glitches, patches, and everything else in between. Other e-commerce platforms that are open-source require you to have a developer to code and make repairs every now and then. With Shopify, all you have to worry about is your business’s growth.
Cons of Shopify
Maintenance Costs
On top of your monthly fee on Shopify (which starts at $29 USD), many of the apps you will use for your store are paid apps. They do have free apps, but the ones that will be of greater value for your business management and growth will be the paid ones.
Without apps, your Shopify experience will be very basic and you will have to do a lot of tasks manually. However, be careful to not add too many apps to your Shopify store, because they can slow down the site.
Create Store from Scratch
Sellers who just want to start earning as quickly as they can find it inconvenient that they have to design their store from scratch. They will have to spend a lot of time testing what kind of design(s) would look best for their business. Shopify provides templates that sellers can use, but buyers can tend to spot an overused website design.
Effort in Creating Traffic
The explosion of traffic on Amazon has little to do with an individual store’s efforts – it is the Amazon experience that buyers go for. Products sold on Shopify don’t have the same visibility and reach as products sold on Amazon. As a result of this, expect that your conversion rates would be lower on Shopify than they would be on Amazon.
If you sell on Shopify, you have to create your own traffic because your site stands alone. You can do this through SEO (Search Engine Optimization), content marketing, sponsored posts with influencers, and more. These sorts of promotional methods are done outside of the Shopify platform, while on Amazon, you can do advertising within their platform.
Seller is Responsible for Customer Service
As a smaller business owner, this can be a pro because establishing relationships with customers is important.
However, if a Shopify store gains popularity and a lot of traffic, the customer inquiries can get overwhelming. This would very likely cause a seller to have to hire someone to do the customer service for them, and it’s an additional expense.
Lack of Professional Reporting for Basic Package
Reports and data are very important to regularly review as an online seller. With the Basic package on Shopify, you won’t be able to see as much information as you would on a more advanced package. Without as many metrics, a seller is lost on what kind of direction they should take next for their business.
Location Restrictions
As Amazon continues to expand worldwide and allow orders from the majority of countries, it is not the same case with Shopify. Although all countries can access a website hosted on Shopify, to actually purchase through Shopify Payments, a buyer’s location must be part of their limited list of supported countries.
Sellers Fulfill Their Own Orders
If a Shopify seller isn’t using dropshipping, they will have to fulfill their own orders. This is the opposite of Amazon FBA where Amazon takes care of it. If a Shopify store is picking up in sales, this routine can get exhausting. The owner of the store would most likely hire help in fulfilling orders, which is an additional expense.
Where Should I Start As a New Online Seller?
Think of it like if you were to open up a physical store for your new brand. The smart thing to do is to open where there is a lot of foot traffic and visibility, like in a mall or a busy street.
Believe it or not, a high-earning Amazon seller doesn’t automatically mean that their brand is popular and familiar to everyone who browses the site. What they do have is access to a large customer base!
Therefore, if you don’t prioritize the brand recall as a new seller, Amazon FBA is the better option.
Most business owners have a long-term goal to build a recognizable name and brand identity, and that’s great! Even in this case, we still recommend that you start your new business by selling on Amazon, then expand to Shopify once your brand gains traction. This way, you can feel confident that you can invest money, time, and effort into a second platform without failure.
In our experience, the convenience of a large customer base, the FBA service, and the Amazon name itself made Amazon our main focus even though we do sell through Shopify and other e-commerce platforms. 95% of our brand’s sales come from Amazon!
Where Should I Sign Up if I’m Already an Online Seller?
If you have been selling on another e-commerce platform for a while now and want to level up your brand identity, Shopify is the way to go. We recommend that you do this once you feel confident that your brand can get traffic on its own.
Shopify allows sellers the creative freedom to customize their site, establish connections with customers, and overall establish themselves as an independent brand rather than just appearing to be another seller on Amazon out of millions.
Conclusion
The right answer to the question of if Amazon FBA should be prioritized over Shopify depends on your personal goals, time constraints, and knowledge as a seller.
Envision the kind of business you want to grow. Are you aiming for high profits, or are you aiming for brand recall? You can do both, but with the right strategy.
That is why overall, we recommend that Amazon is the best place to focus on first.
By starting on Amazon, you can start small with fewer risks. See from there if you can invest more resources later on into building your brand identity on Shopify.
Which section of the article provided the most value for you? Let us know in the comments and feel free to ask us questions! Continue to expand your knowledge as an e-commerce seller by following the Sourcing Monster blog and enrolling in my Amazon FBA course.