Dropshipping vs. Amazon FBA Which One Is Better [A Biased View]

in this video we're going to be comparing Amazon FBA versus drop shipping which one is better and why what's up guys Paul here from dropshipping Titans dot-com and as I said in the intro we are going to be comparing Amazon FBA versus drop shipping now full disclaimer here my website drop shipping Titans calm this YouTube channel is all about drop shipping so I know I'm very biased here but I'm going to try to be as unbiased as possible before we dive into this though let me just quickly explain what drop shipping is and what FBA is so drop

shipping is a model where you sell items on websites like Amazon eBay or Shopify once the item sells then you have your supplier ship the item directly to the customer so you never have to deal with inventory now if that explanation is too brief for you underneath this video I have a free training introduction to eBay dropshipping another one amazon drop shipping watch one of them or watch both them because they're both free so that's drop shipping FBA is a little bit different that's when you buy a whole bunch of items and ship them over to Amazon's warehouse Amazon holds on to those items until someone buys them on Amazon then Amazon will ship the items to your customers for you that's called fulfillment by Amazon there are several different ways to do FBA the first is where you go to local stores like Walmart thrift stores you go to garage sales you buy individual items and you ship those items one by one over to Amazon FBA the second way to do that and by the way that first way is called retail arbitrage the second way is called online arbitrage basically the same thing but you're doing all Europe shopping you're buying all the items from online the third way is private label FBA this is when you contact manufacturers in China buy a whole bunch of one item rebrand it under your brand chip all of those items - FBA and then you're just selling one product but multiple quantities of it now what do all of these have common well they all definitely work I've been very successful with drop shipping I have friends who have been very successful with FBA in all different forms I've tried a little bit of myself and I know it does work so all of them do work and obviously with all of them you can sell on Amazon and the other thing that they have in common is that you really don't have to worry so much about my turns or shipping because a different supplier is taking care of that for you with drop shipping is your supplier with FBA it's Amazon itself Amazon FBA here though does win out slightly here because with FBA once you get the items over to Amazon's warehouse they take care of everything all the customer service and with drop shipping you're kind of like a middleman through the whole process so for this one FBA just wins out a little bit but let's go into some more of the differences between FBA and drop shipping so another

big difference between drop shipping and FBA is what platform you can sell on with FBA obviously you can only sell on Amazon with drop shipping you can sell on Amazon eBay Shopify even Walmart and there's a lot of other web sites out there as well so a lot more diversity they're not really putting all your eggs into one basket the other big difference and this is a big one for a lot of people who are just starting out in e-commerce is the cost of getting started so with Amazon FBA specifically what I'm talking about here is private label you need to buy a lot of these products from China large bulk order of them and ship them over to FBA I've heard numbers that you need at least a minimum of $1,000 to do that some even say as little as $2,500 in order to do that with drop shipping you're not buying any items until someone buys them from you so the cost of getting started is much lower and we'll actually talk more about that in a couple of minutes but I wanted to dive into something else that's different between them and that's the product research see with FBA again you're buying a big load of items over from China one item just multiple quantities of them so you better make sure that the item that you purchase is going to do well on FBA and that you really do your research to make sure that it does well and if it doesn't do well then that's a problem because then you have all these products that you're not selling at the profit margins that you anticipated or they're not selling at all with drop shipping though we have a lot more wiggle room and room to grow and to learn and to actually learn while doing it because we drop shipping you list some products up for sale let's say on Amazon or Ebay if they don't sell well like who cares you just delete them and do some more research find a different item and list that one up and then as time goes on you start to learn how to do the research right which items sell well and it doesn't cost you much if anything to learn that as you go along whereas with FBA if you make a mistake with your research it could be a very costly mistake another difference between drop shipping and FBA is what I'll call the lead time that is how long it takes you to get the items up and active in your store and how quickly you can get a sale on those items so with FBA you got to do your research then you have to contact manufacturers in China you have to order samples potentially you have to inspect the samples you have to get pictures of the products taken you got to order the products and get them shipped over to FBA and then it oftentimes takes an Amazon a little bit of time to actually get the items added to their website with drop shipping we can literally find products today and get them listed on to Amazon or Ebay in a matter of minutes and make a sale on that later in the same day so the lead time with drop shipping is much shorter so far

it seems like drop shipping is the winner here but of course there are areas where Amazon FBA outshines drop shipping and the first is where it comes to customer service and the amount of work that you have to do like I said in the beginning once you get your items over to Amazon FBA x' warehouses they take care of everything for you they will ship out the items if there's any problems with the order or the shipment they take care of it and they make sure that all the returns are processed and they take care of all of that for you with drop shipping you're still in the game after the item is ordered from you then have to make sure that your supplier ships out the item you have to get your tracking numbers to your customers and you have to make sure that all the returns and customer service is handled by you now with that said you can always do what I did which is that I hired some virtual assistants that do all that for me so it's still passive in the way that FBA is but I would say that overall FBA wins out here because that is built into the system now of course that means the fees are going to be higher for FBA than they are with drop shipping so if you're doing drop shipping let's say on Amazon its merchant fulfilled so it's only going to be 15% fee FBA fees are higher than that so that's just something you want to be aware of now another advantage of Amazon FBA over drop shipping are the margins so when you order these products and create your own brand of products you really determine what the price is going to be with drop shipping you're relying on the market if the market says the item cost this much that's how much it's going to cost and you can't really raise the price of that because they're going to be other people selling it cheaper than you that's a big difference between the two of them right there and Amazon FBA will have the higher margins the other advantage of Amazon FBA is that potentially you are creating a brand for that product or brand for similar products so for instance let's say you really into surfing you wanted to sell a surfboard through FBA so you buy some surfboards from China and you make your own listing on Amazon it's a surfboard and starts to do well then maybe you buy a shorter surfboard or a different variety of a surfboard so now you're building everything under your one brand so that could be really powerful definitely hard to do but if you do it right there is a lot of value for you in doing that with drop shipping you don't get that unless you are doing Shopify where you're building your own website then everything could be under your own brand on the website

let's talk also now about scalability how quickly can you scale up both of these businesses without on FBA once you find a winning product you can then reinvest that money into buying more of that inventory so that you continually sell the same product and you can also reinvest that money into a new product and you could have multiple FBA products available for sale on Amazon again each of those is going to require the research the lead time and then actually getting a listing created on Amazon with drop shipping the benefit there is that you can get items listed up like that so you can quickly scale this business so I do think that is a benefit of both of them is that you can scale up both of them drop shipping of course I feel like with scale up a little bit faster but FBA because of the higher margins again there is a lot of potential there to scale up to really high margins for yourself so in conclusion the biggest

benefits of Amazon FBA are that you're going to have the higher margins and that you are creating your own products that stand out in the marketplace and you don't have to worry as much about competing against other sellers drop shipping the biggest benefits of drop shipping are one the diversification you can sell on different platforms and you can sell in different niches you're not limited to just one niche and the other big benefit of drop shipping is the low startup cost you don't have to buy a ton of inventory upfront in fact you buy zero inventory upfront which is really why it's so easy for beginners to get started with drop shipping pretty much or very little money to get started so there you go guys that's my understanding of the differences between Amazon FBA and drop shipping I know there's going to be a lot of you out there who would disagree with a lot of the points that I made please leave a comment below and let me know like I said I haven't done a ton of FBA in the past very little I do have a ton of experience with dropshipping so I understand that this is going to be biased I try my best to do a lot of research and to really understand the benefits of both so I can give you as unbiased opinion as I can but please let me know down below whether I did a good job if you've done FBA school me on it let me know why that's better than drop shipping I really want to start a dialogue here and understand it better but if you guys got any value out of this video if it was entertaining at all make sure to smash the like button down below make sure to subscribe to the channel for more information about drop shipping and as always guys thanks so much for watching and I'll see you in the next video