Amazon FBA vs Dropshipping: Which Is Better?
If you’re looking to start an online store on Amazon, two easy options are dropshipping or using Fulfillment by Amazon (FBA). Dropshipping allows you to sell products without carrying any inventory and Amazon FBA allows you to use Amazon fulfillment centers to store, pack and ship your orders. In this article, we’ll go over the basic differences between the two and their relative benefits.
Benefits of Selling On Amazon
If you’re wondering whether or not to use FBA or just dropship on Amazon, you have to think about your goals. Before we dive into that, let’s go over the general benefits of selling on Amazon:
- Amazon will give you access to 2.5 billion monthly shoppers.
- According to a recent SWOT analysis, Amazon’s annual revenue in 2017 was $3.033 billion – a 30.8% increase from the year before.
- Over 50% of Amazon sales come from third-party sellers.
- Your e-commerce business will be easily scalable – you can make your online store as big or small as you like.
- According to a study conducted by BloomReach, 9 out of 10 consumers will price check a product on Amazon before making a purchase.
In other words, Amazon has developed a stellar reputation based around its competitive pricing, reliable customer service, and quick shipping. As an online seller, you will effectively benefit from this excellent reputation. Essentially, shoppers will view you as an extension of Amazon even though you are technically an independent, third-party seller. It’s a win-win proposition for everyone involved. The only question now is whether to use Amazon dropshipping or Amazon FBA to reach this customer base.
So let’s take a quick moment to look over some research from Google Trends:
Over the last years, there has been a huge increase in the search interest on Google for the term “dropshipping” and “Amazon FBA”. Ultimately, choosing one over the other will come down to the relative benefits of each one.
What Is Amazon Dropshipping?
Let’s start with a basic introduction to dropshipping. This is an e-commerce business model in which the online seller does not handle the logistics of storing, packing, or shipping ordered items. In other words, they don’t maintain any inventory, warehouses, or shipping centers. Instead, a dropshipping supplier oversees the logistics and is responsible for fulfilling orders.
Most sellers use an e-commerce platform like Shopify or WooCommerce for dropshipping. In the case of Amazon dropshipping, however, they simply use Amazon as the website where they list the products for sale.
Here is how you can dropship on Amazon:
- Sign up for a seller account on Amazon (this will cost a monthly membership fee).
- Find a dropshipping supplier that provides product feeds for Amazon such as GreenDropShip.
- Pick the products you want to sell and import the supplier’s data feeds into Amazon.
- List your inventory and create your Amazon store.
- When an online shopper makes a purchase, you place an order with your supplier.
- Your supplier fulfills the order by pulling it out of the warehouse, packing it, and then shipping it to the end customer.
What Is the Amazon Dropshipping Policy?
Dropshipping on Amazon can get a little tricky. That’s why it’s important to learn their policy precisely. Once you have chosen a dropshipping supplier and are listing your products on Amazon, then you have to be sure that you:
- Assume the role of the seller of record of your products. In legal terms, this means that you sold the product to the end consumer (even if Amazon listed it and a supplier fulfilled the order).
- Identify yourself as the seller on all packing information.
- Assume the responsibility of handling customer returns for products.
- Always comply with the terms of your seller agreement.
In other words, Amazon dropshipping is not allowed if you:
- Purchase items from another online retailer and then have them fulfill the order (ship to customers).
- Use packing slips, shipping information, or invoices with a name other than your own.
If you carefully follow these steps, then there shouldn’t be any issues with your e-commerce store.
For a more detailed breakdown and tips on how to succeed, make sure you check out our blog entry about how to dropship on Amazon.
What Is Amazon FBA?
FBA means Fulfillment by Amazon. This is another e-commerce business model that allows online resellers to work from home and take advantage of Amazon’s huge customer base. Amazon oversees the shipping and handling of items to the final consumer. They do this at Amazon Fulfillment Centers, which have been created to fit the specific needs of online sellers. For instance, there is no minimum number of items that need to be shipped.
Due to its convenience, Amazon FBA has become an exceptionally popular business model. Plus, Amazon has over 2 million sellers, giving you the opportunity to forge a successful online store with plenty of customers.
All this means that enrolling in the Amazon FBA program gives you the chance to automate order fulfillment and to benefit from Amazon’s advanced shipping services.
Using Amazon FBA with an External Supplier
A lot of online sellers who use FBA actually own the inventory that they’re selling via Amazon. However, it is easier to use a wholesale supplier with FBA services. That means that you will buy your products in bulk from the supplier who will then prep the products and send them to Amazon’s fulfillment centers.
Here at GreenDropShip, we provide FBA services if you want to sell any natural or organic food, beverages, supplements, body care products and much more. Before sending your inventory to Amazon, we make sure to do the following:
- Package prep – Each package will be packed according to Amazon specifications.
- Kitting – This is grouping items together in a single purchase.
- Poly bagging – Amazon requires some items to be packed in a multi-pack or with multiple bags.
- Bundles – We can create bundles of related products for you.
Here is how you can use FBA services with GreenDropShip as your wholesale supplier:
- You order products in bulk from your wholesale supplier such as GreenDropship.
- GreenDropShip packs the products according to FBA Prep guidelines.
- GreenDropShip ships your inventory to an Amazon fulfillment center.
- You list the products on your Amazon store.
- When you get an order, Amazon will ship the products to your customer.
Which Should You Choose – Amazon Dropshipping or Amazon FBA?
This depends on what you are looking for. Both Amazon FBA services and dropshipping:
- Require low startup costs.
- Are relatively low-risk business models.
- Let you focus on your marketing efforts as either your dropshipping supplier or Amazon will handle the logistics of storing, packing, and shipping the products.
However, there are some fundamental differences, including:
- With Amazon dropshipping, your name and information are on the packing material, so you don’t benefit from Amazon’s branding (beyond being listed on the website).
- With Amazon FBA, the packages are Amazon-branded unlike with dropshipping.
- When you use Amazon FBA, you have to pay extra FBA fees on top of your monthly seller account unless you use a supplier that doesn’t require extra fees such as GreenDropShip.
- Amazon FBA ensures that your deliveries are handled by Amazon while using a dropshipping supplier means that they will be responsible for storing and shipping your products.
So whether or not you want to use Amazon for dropshipping or just FBA, it all depends on who will ship the products and how you would like to brand your packages.
Luckily for you, GreenDropShip can work with both. In addition to being a dropshipping supplier for Amazon sellers, we also offer FBA prep services.
Plus, if you become a GreenDropShip member, you won’t have to pay any FBA fees as this is included in your membership. You’ll also have access to over 20,000 natural and organic products that are made in the USA. If you’re looking to start selling on Amazon with GreenDropShip as your supplier, then contact us now or view our product catalog to get started!