One of the most important decisions you have to make in structuring your eCommerce business is how you will deliver the products to your customers.
Both dropshipping and Amazon FBA handle the order fulfillment for you. But which of the two is more suitable for your needs? Let’s tackle their pros and cons:
- Lesser investment – ideal for entrepreneurs who are not yet ready to invest huge capital.
- Minimal risks – since you get the difference between what the customer pays and the price charged by your supplier, you’ll hardly lose money if a transaction didn’t go well.
- Time-saving – no need to put a lot of time and effort into product packaging, shipping, and managing your inventory.
- Jump into markets with ease – This one is a huge advantage of drop shipping. Since all it takes really is to find the right product and a good supplier, there is no limit on the number of categories you can explore. You can easily dive into different markets and establish yourself as a major seller.
- Less profit margin – since you are not the only one selling the products, returns are comparatively lower than FBA.
- Customer service issues – it can go out of control if you don’t have a support team to handle customer complaints.
- Promotions and PPC campaigns – since your profit margins are slim, it will be hard for you to offer amazing discounts or run PPC campaigns.
- Huge competition – many sellers are trying to sell using the same business model. Some sellers even compromise profits just to sell.
- Inventory is not in your control – It will be a bit detrimental for your business if your supplier fails to deliver the number of stocks you need or suddenly goes out of stock. Going out of stock will also negatively affect your ranking on Amazon. Once that happens, you will need to basically start from scratch to regain your position.
- You can't guarantee shipping – Just like inventory, shipping is another aspect that is out of your hands in dropshipping. It will all depend on your supplier’s capability to process and deliver the orders on time.
Amazon dropshipping is a great business model, provided you find a trustworthy and reliable supplier. On your end, you need to make sure to create a good listing, gather reviews, and improve your product’s visibility.
Learn more about strategizing on Amazon today. Book a call with us.