Dropshipping is a method under E-commerce where a seller can place an order directly with their wholesaler or vendor. The supplier, in turn, can then deliver the product to the end customer, making the seller of a product responsible only for the storage and packaging of a product. Many individuals and small businesses are opting for this model since it requires minimal investment. They need to register with an E-commerce platform to advertise their product and take care of the inventory for shipping it to the customer.
Dropshipping or Amazon FBA
Amazon’s FBA (Fulfillment By Amazon) program has a higher risk and investment than dropshipping. But the profit margins and customer base is superior in the case of the FBA program. Dropshipping with Amazon or any other E-commerce platform needs more work to establish a customer base. It involves finding the supplier and the selling platform independently. That is not the case with the Amazon FBA model. It is suitable for businesses that outsource logistics and customer service and focus solely on manufacturing the product.
Pros and Cons of Dropshipping
Dropshipping doesn’t need a massive investment on the seller’s part. When buyers place an order with a seller, they need to place the same order with a supplier. The seller will handle the logistics, delivery, and customer service for that buyer. Dropshipping with any other E-commerce platform works this way. However, there are certain disadvantages to this method. The profit margins are lower compared to the FBA platform. Lower margins also affect your promotional campaigns. There is high dependence on a supplier, which can be a problem if their customer service or product knowledge is not par.
Amazon Dropshipping vs. Dropshipping
Although Amazon dropship is like the model offered by other E-commerce ventures, there are essential differences between the two:
An Amazon dropship carries minimal risks and better profit margins compared to other E-commerce firms. The shipment and warehousing charges are also lower than most of their competitors. The benefits of offline/online retail stores with Amazon ensures better sale prospects and lower risk of unsold inventory.
Dropshipping entails listing your products on an E-commerce website and packaging. So there is nothing much in terms of investment. Amazon dropshipping ensures a better return on the seller’s capital. Their expertise in shipment and delivery of products also leads to lesser issues for the customer. It also improves the chances of repeat sales, thus driving overall profits for the business.
The profit margins for Amazon dropshipping are better than most of its competitors considering the larger audience base. Their brand image and customer base ensure greater chances of customers buying a product. It also allows the seller to quote higher margins and earn more when compared to other dropshipping portals. Driving external traffic is also easier for your product on Amazon, thus ensuring greater visibility.
Unlike models like FBA, the seller gets in direct contact with their customer in dropshipping, which ensures the reputation of your supplier and their service impact the customer’s perception. Amazon has the edge over other dropshipping firms in this area because of their brand value and service delivery.
The supplier has a crucial role in the dropshipping model. They act as the face of your business for logistics and delivery of a product. Amazon dropshipping ensures that shipping risks are set aside, and your product gets delivered to the end-user. Most other dropshipping companies suffer in this area due to their relative lack of experience and expertise.
Freedom to Customize
Dropshipping allows for greater customization in terms of product diversification. Since there is no need to maintain inventory, sellers can choose their catalog of products with much more freedom. They can sell products based on profit margins, popularity, and interests. Amazon dropshipping enhances this advantage even further for its sellers because of its wide range of products.
Driving external traffic is not as easy as it sounds, especially for dropshipping. Several dropshipping websites suffer from a lack of visibility. Their backlinks or PPC campaigns are not as effective as Amazon. Its brand value, customer base, and SEO algorithms are robust enough to drive heavy traffic towards your business.
So, Do we have our Winner?
Both Amazon FBA and dropshipping facilities have their merits for any entrepreneur. A business can use either way to succeed in the market depending on their risk aptitude and brand objectives. To know more about dropshipping models, you can visit here and start your journey to this E-commerce model with zero investment.