Today, we are going to talk about a very hot topic and that is Amazon FBA versus branded dropshipping. You’ll have a full understanding of what Amazon FBA is and why… Well, listen, just hold on. I’ll let you make your own judgment of which of these two methods actually rocks and which one kind of sucks. All right. Let’s get into it.
What is Amazon FBA?
So Amazon FBA is fulfilled by Amazon. It’s basically dropshipping but on Amazon. Let’s say you ordered three things on Amazon and they come in three different packages. Well, voila, you are dealing with Amazon FBA.
Most people have ordered from there and didn’t even know it. So that’s what this is. And that’s what we’re talking about versus branded Shopify drop hipping. So that’s what I teach. That’s where you launch your own store on Shopify and run your own business without using Amazon’s platform.
Okay. So we’re going to get into some of the pros and cons and let’s start with a number one. Amazon FBA is very high risk. Okay. The reason being is because you first have to order all of your products in bulk. So this might be hundreds of products or thousands, depending on what you sell.
Level of Risk
So we’re going to get into some of the pros and cons and let’s start with a number one. Amazon FBA is very high risk. Okay. The reason being is because you first have to order all of your products in bulk. So this might be hundreds of products or thousands, depending on what you sell.
You have to order it in bulk first, and then you have to ship those orders to Amazon. Right? So what that means is you have to have a lot of money and a lot of confidence in what you’re doing to make sure that you are not throwing money down the drain, right?
Because a lot of you are new business owners and you’ve never sold anything before. So here we go, spending thousands or tens of thousands of dollars just to purchase a large enough order to work with Amazon. And another one of those risk is the fact that you’ve got to pay Amazon to hold your orders for you in their warehouses.
So as a new business owner, that can be extremely risky. Now, on the other hand with Shopify branded dropshipping, you don’t have that issue. Right? Because our products are coming directly from the supplier and we don’t pay for them until a customer has already ordered it. So Amazon FBA, risky on that one. Branded drop shipping, no risk at all.
Number two, so some suppliers will not want to work with you if you are on Amazon FBA. The reason is suppliers want to get their product sold, but they don’t want to over saturate and they don’t want to be competing in a place where there’s too much going on in the market.
And a great place as an example for that is on Amazon. They may have their own store on Amazon, therefore they can’t work with you because you are a direct competitor. So this happens often in a lot of niches.
So you may have to really think about what it is you sell and what suppliers are going to want to deal with you and what suppliers are going to turn you down, honestly. That could be a significant challenge depending on what product you decide to sell.
Now with branded dropshipping, this is not nearly as much of an issue because you are launching your own standalone business. There will be no Amazon type of platform where you can just type in an item and see 500 versions of it. You’re going to have your own store, your own website, your own customers. So it is a lot less of an issue, usually a non-issue.
Access to Customer Data
you have almost no access to your customer data when you use Amazon. And I know that sounds insane, but it’s true. So when you use branded dropshipping through Shopify, which is obviously my favorite platform, you have all of your customers information, you have their name, you have their address, you have their phone number, you have their email address, you know everything that they give you, you have that information.
When you use a service like Amazon FBA, you have almost none of that information. You, at this time, because it changes often, but at this time, all you get to see is your customer’s address and the thing that they ordered. So why is that such a big deal and a problem?
You can’t contact your customer. You cannot email them through email marketing, which is a massive money maker in e-commerce. You no longer have that option. You don’t have that phone number so that you can’t do any type of text marketing to that person.
And not only that, since they never visited your actual website, you cannot re-target them through ads at all. Amazon has all that data and you have none of it. So as a business owner, having your data, owning your data, having access to your data is paramount, because those are your customers. And Amazon doesn’t let you have them in that way. So it’s just something to think about if you are entertaining the concept of doing fulfilled by Amazon.
Owning Your Platform
Amazon is a tricky platform and it is a massive platform. And because they own everything that you do on that platform, because you signed their terms and conditions, Amazon can shut you down at any time, for any reason, no explanation.
This happens all the time. It’s kind of how Instagram works, right? Where sometimes people will lose their Instagram pages and it’s literally impossible to get it back. Amazon is the same way. If they find or think they found or their algorithm found, or a bot found some issue with your brand, they can shut your entire business down at will.
And there are processes and procedures to get it back. But the bottom line is, however long you’re down, if that’s one hour, one week, one month, you are missing tons of money in your business. So with branded dropshipping with your own store that you own on a platform like Shopify, this is no longer an issue.
Shopify will never come and shut your website down. So unless you are not paying your $29 a month, this is not an issue you will ever face on the platform.
Having a Sellable Asset
one of the largest cons of working with Amazon FBA is that your Amazon store is not truly a sellable asset, not in the way that it would be if you owned your own branded dropshipping store.
And here’s why, when you begin to work with Amazon, you have to sign away a lot of your privileges in their terms and conditions. And one of those main terms and conditions is that you are not allowed to sell your Amazon seller’s account.
So essentially this massive business or small business that you have spent all of your time and energy and money into building, you’re stuck with it, you own it and that’s it. And one of the beauties of entrepreneurship, especially in something like e-commerce is building these businesses and then selling them, build and sell and repeat.
And that is not exactly an option on a platform like Amazon. People do sell their stores, they do get away with it. But the vast majority, if Amazon finds out, they will flag you. They will shut down your account. They will keep your money. They will ban you from the platform. It is a whole massive, massive ordeal.
So this is something to be extremely wary of. And not only that, when you run an independent business, you own an email list. And an email list and your retargeting pixels and all that good stuff that you own is a part of the valuation of your business.
So you can sell a business for a lot more when you own it outright, versus if you are using a marketplace like Amazon. So my question to you is, are you into Amazon FBA? Will you still try it knowing the cons that come with it, or are you going to run directly to branded dropshipping?
I would really love to know. There’s no wrong answer. It’s really a personal choice. Let’s continue this conversation in the comments, as well as on my Instagram account. You can find it linked in the description below.
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