These two business models are what people always seem to be in between, and the reality is that both can provide you a really big opportunity to earn money online. So, if you’re wondering which of these two models to follow, then to keep reading this article, what’s up guys, welcome to todays ecommerce business model, face-off in case you’re new here, i’m nick young of seller trade craft and I started doing my toes into the e-commerce space.
About four years ago, as a sideline project, and after just six months, I quit my job because my online sales had generated an income of five times more than my salary. That gave me the personal and financial freedom that I always craved and it opened up the door for me to set up my own company and to be my own boss. So most of you reading this article are probably looking at how you can make a side.
Hustle with an online business and unless you’ve been living underneath a rock, i’m sure, you’ve heard of the exciting opportunities that uni Commerce offers it’s a crazy space right now – and I know this because a lot of people are always asking me which of these two models Are going to bring me the most profit, what’s going to be the better choice so before we get knee-deep into this topic, I want you to first consider subscribing to this blog and hit the notification belt.
If you’re interested in creating a passive income online, we’ll be creating new content every single week to help you build your own, profitable online business, okay, so let’s go ahead and dive back into our topic. So let me first give you an overview of how each of these business model works and, after this article you’re going to understand, what’s the difference between the two, so let’s first start with drop shipping.
What is drop? Shipping, the drop shipping business model means that a seller like let’s say me or you doesn’t have to keep any inventory on hand, doesn’t have to own any inventory and only buys inventory whenever a sale is made. So essentially, a seller, like myself, would partner up with a supplier who manufactures and warehouses these products and ships them directly to the customer. This way, there’s no need for a seller like myself to own or rent a warehouse to store the products, so I actually don’t own the product at all.
If I were to drop ship, the the transaction happens only when a sale is made. So, let’s go ahead and walk through how the drop shipping model works, step by step, step number one! You create a Shopify store to be your own online storefront, an e-commerce shopping platform step two: you drive traffic from various sources, offline traffic like Facebook and Instagram ads to your storefront step. Three, you get the customer to place an order and they pay for it step.
Four, you then forward that order to the supplier, with customer details and step five, your supplier ships, the order directly to the customer for you, this is all done without ever seeing owning or touching the products, and here you never have to take any inventory risk because You only buy a product when you make a sale. Your focus is entirely on marketing and optimizing your storefront. This means that you never have to invest money in advance for the products and you’ll only pay a supplier for a portion of the payment received from the customer.
Okay. So now that we’ve covered drop shipping, let’s go ahead and dive into how Amazon FBA works. So when you find things to sell in Amazon, what you do is you list them on a product page, you label it under your own brand and then you send it off to an Amazon, FBA warehouse where the items are stored, then packaged and received and shipped When the item sells now here’s the major differentiator between drop shipping and Amazon FBA in the Amazon FBA business model, the seller needs to park money upfront to order products from the supplier.
So that means that you’re ordering inventory in advance – and you own the inventory and once you receive it, you go ahead and send it to Amazon’s warehouses for fulfillment. Now with Shopify drop shipping, there’s no need to send in store items in separate warehouses. Again, you only order items from the supplier and they’ll take care of the shipping and send the product directly to the customer. Typically, though, this means that doing drop shipping you’ll actually make less, which I’ll go ahead and dive into later now, with the Amazon FBA business model, Amazon handles a major portion of the fulfillment and selling process.
It makes it a lot easier for sellers who own inventory to focus on finding profitable products to grow their business. So to help you further understand how this works. Let’S go ahead and just quickly walk through the steps of actually selling the product in Amazon. So you can see what parts the seller handles and what parts are handled by Amazon, FBA, okay, so step number one. You list the product on amazon.
Com step. Number two: you prepare the item to send to Amazon’s warehouses, step three: you ship the items to Amazon’s warehouses, step four Amazon, unpacks and stores your inventory and receives it step 5 Amazon shows up or sorry your product shows up as available on amazon.Com step. Six, a buyer from Amazon right, a buyer goes Amazon. Web site places the order on Amazon and step. Seven Amazon warehouse workers find your product and ship it to the customer step.
Eight, your customer receives the product and let’s say two days: if they’re a prime member. Okay, so here once the products are listed and ready for sale, it’s handed off to Amazon and they actually take care of all the rest. Amazon handles a lot of the hardest and most time-consuming parts that having an e-commerce business. Alright, now that we have a clear picture of how drop shipping and Shopify works and how Amazon FBA works, let’s go ahead and now dive into the pros and cons.
So this is what you guys have been waiting for. So really, I want to preface this depending on your needs in your situation. This is understanding all these parts is going to help you decide what works best for you. So, let’s first start off by talking about startup costs with Shopify drop shipping. The most appealing advantage of this model is that there is a lower startup cost, there’s really virtually no upfront cost for the product itself, because you’re only buying it from the supplier when sale is made.
So it’s all on as-needed basis, so you don’t need to pay for storage fees or anything like that. So after finding a drops are shipping supplier, all you need to do is actually set up a Shopify website which costs about $ 29 a month and have enough money to do advertising because remember you have to drive all the traffic to the website yourself. So this actually brings us to one of the major cons of doing Shopify drop shipping because you’ll be using advertising from external sites to bring traffic to your store.
Now, at the very least, your budget will pie range from five hundred to a thousand dollars a month, but it’ll definitely scale up and up as you are driving more and more traffic, and this is all spent on marketing ads and with the Shopify model. You’Ll be doing tests, you probably run through at least twenty products before you find one that’ll be a winning product for your webstore, so in reality you can probably spend a lot of time and money doing a trial and error on products that may or may not Work and it could take a longer time depending on your level of experience with advertising.
Now, let’s go ahead and dive into costs for Amazon FBA. So if you’re doing private label on FBA, you know you can actually take a take advantage of the traffic that Amazon generates to their own storefront to their own marketplace. So it’s actually, if you don’t know already the most-visited ecommerce site in the world today. Statistics alone shows that, as of December 2017, 197 million users visited Amazon’s web sites per month.
So with that huge number of traffic, you really don’t have to do as much paid external advertising on Amazon as you do for Shopify running Facebook ads. Okay, but since there’s competition on Amazon, Amazon actually has an internal PPC system, which you can use to drive internal traffic from Amazon to your listing. So you can get your products to appear on the Amazon searches, but the reality here is that the learning curve with Amazon PPC is not as steep as learning.
Let’S say, Facebook ads or Google Ads to get the advertising needs. So trust me there’s going to be a lot of tools that you can find to help you find the right product and what keywords to target for your ads on Amazon. So if we’re going to talk about a startup costs entering the Amazon FBA private label, space will require that you have a higher budget for specifically paying for inventory and also paying for fees for shipments and logistics to get your products from China or wherever you’re sourcing.
It to the warehouse, and once it’s at Amazon, extensive warehouses, there’s also an additional fee that you have to be cognizant of, which is the storage fee. The Amazon charges you on a monthly basis for fulfillment. The other things that you’re going to have to consider is that there are fees for designing for photography for buying barcodes, all of which are part of your branding process in making your product unique and stand out from the pack.
So, realistically you can start selling products on Amazon, with about three to five thousand dollars of startup budget mainly spent for your products, but keep in mind, although you might be spending a lot for the upfront quantity realize that you’re buying quantities in bulk, which means you’re Getting the bulk price right, so that means that you’ll get a higher profit margin compared to selling something on drop.
Shipping starting capital might be higher with Amazon, but there’s you’ll have a better chance of getting a higher return on your investment through doing private label and selling your own brand. Now, let’s go ahead and talk about marketing costs. Okay, so this is another one. So I kind of touched on this earlier: Shopify drop shipping. When it comes to marketing. You really need to master a lot of the skills when it comes to Shopify drop shipping things like marketing traffic generation conversion, optimization brand building working with comparison start shopping engines.
So what you can expect is there’s going to be a steep learning curve, because setting up the Shopify site is easy. The hard part is actually driving traffic to your store because there’s no immediate audience to go after so really. This is the massive differentiator Tiffany drop shipping, an FBA and drop shipping. You drive traffic to the website, mainly from paid traffic, and you can’t be successful in drop shipping without knowing how to create Facebook ads and to get good results.
You have to understand how to create Facebook campaigns using custom, audiences or look-alike audiences and other advanced and interesting strategies like setting up conversion campaigns or using pixels to retarget audience members. So you’ll know how to do things like you know. You’Ll have to learn how to do things like reading google trend graphs, creating Google Ads setting up email campaigns and even reaching out to Instagram influencers.
So these are all things that you have to think about if you’re setting up a standalone, Shopify site. Of course, you could also do free traffic through, let’s say SEO, but you also have to realize that too traffic from SEO it’s going to be a long process, because you have to spend a lot of time creating content and it takes a long time for those For that content to build and rank so that you actually get traffic to your store so in reality to get their store started upfront quickly, you’ll need to have a good skill set with understanding how to create paid traffic acts.
Now, let’s go ahead and shift gears and talk about Amazon, FBA marketing costs. So with Amazon you don’t need a create Facebook or Instagram ads, and you don’t have to do that. Steel from the ground up. You benefit from Amazon’s massive budget on gathering customers and their algorithms and their expertise, so you can leverage Amazon’s astronomical traffic. Okay, I mean, based on statistical own Amazon, has almost 2.
6 four billion visits from February 2018 to July 2018. That’S just completely mind-blowing. So what that means is there’s an existing trust. The Amazon customers have an Amazon. Well, that said, all you really have to focus on is optimizing. Your listing and drive into traffic using Amazon’s PPC system, which is vertically integrated within Amazon FBA, and one of the most important thought concepts to understand, is that the people who visit Amazon already know what they want to buy.
All they need. All you need to do is to find the relevant keywords for your product and make sure that your listing appears in the search results. So with Amazon you don’t need to focus as much as establishing a brand. You know thanks to Amazon’s, could will and thanks to their fulfillment, you know you’ll be able to take advantage of Amazon’s massive massive traffic. So let’s go ahead and dive into fulfillment, because this is a really important thing to consider when you’re deciding between the two models and really you know.
This is where I think Amazon really stands out from the drop shipping model and the reason why is because Amazon has a crazy, unparalleled fulfillment network, meaning they own distribution centers throughout the US and throughout the world, which makes it really easy to fulfill products to customers And so, since Amazon takes care of the fulfillment, they also take care of a lot of returns, so you don’t have to handle any returns or anything like that and a lot of the customer service is taken care of for you.
People can call Amazon and they can go ahead and get things resolved, and so this this means that, as an Amazon seller, you’ll have enough time to focus on building your business and finding more and more products. Shipping time obviously plays a role in online buying decisions, and so another thing to consider is that, while some shoppers might be happy to wait a few days for their order to arrive from overseas, a lot of people are used to getting their products really quickly.
So this is where Amazon really comes into play. They can deliver products up up to 22 days – okay, sometimes even 24 hours. So that’s where it stands out. What drop shipping usually lead times are longer because suppliers aren’t as reliable or maybe they’re shipping from overseas, and so Amazon FBA is basically the main reason why prime exists? Okay, so essentially for those of you not familiar. Prime members pay $ 13 a month to get two days: superfast shipping, with a bunch of other added benefits exclusive to Prime members, and at some point Amazon will be using drones to deliver packages to the doorstep, but with Shopify drop shipping.
It’S entirely different. Your orders are sent to your suppliers, which means that they have to process the orders and typically they’re, going to be slower shipping times. So if you use the drop shipping method, you’re going to rely heavily on communication with a supplier, and if the supplier fails to update you that they’re out of stock, then you won’t be able to fulfill the order. And you risk having a bad terrible customer experience.
And this can be a massive challenge, so it wouldn’t be wise to just have one supplier. A lot of people actually have as many as two or three suppliers. Just in case, one supplier doesn’t work out so because, ultimately selling something that you can’t deliver on time can ruin your reputation for many Shopify sellers. Finding a great drop shipping supplier is incredibly challenging and it can take weeks or months to find the right person.
This really requires that you build and maintain a solid relationship with your supplier, okay, so let’s go ahead and dive into product selection, so this is a key factor for the business models on both ends. Now, in both Shopify drop shipping in Amazon, FBA you’re going to have to spend hours forging and finding the right, profitable product, and it can take weeks and even in some cases months before sellers find that one winning product shipping enables you to find a slew of New products, you can give try to a new product you to something and it’s not as risky as if you were going to purchase a product in bulk because remember you don’t take any inventory risk in Shopify.
You can sell trending products, and this can help you earn a huge amount of money fast, because you can move very very quickly. All you have to do is find the right product and drive traffic, and that can be done in a matter of days now with Amazon FBA selling trending products is possible, but it’s not necessarily recommended because there’s a long lead time for when the product is produced. When it arrives the warehouse, especially if you’re sourcing from China, so it could be a huge problem, if, let’s say you’re working with the trending item and by the time the product arrives, it’s no longer trendy, then you’re stuck with so much inventory, and you won’t know What to do with it and remember, on top of that, if you have dead, inventory, you’ll be paying for storage fees to keep the products at Amazon’s.
Warehouse disposing of these products are going to force you to take these this investment at a loss, and so that’s something you want to absolutely avoid and that’s why choosing the right product is super crucial to finding success on Amazon FBA on Amazon. Really, the key is just to find a product – that’s already selling well, but that find a product. That’S selling well, but it also in a niche where you can compete and you can dominate your competition.
The good thing is that there are a ton of tools that can help you find winning products on Amazon. You can use software tools like market intelligence, from viral launch, to validate your ideas and help. You find good products that already work well, and you can use that information to study the competition and check on historical data and trends to help you see what the upfront costs and profits are, and if you want to do keyword, research as a fantastic tool called Zhong words, which you can use as well they’re, just a ton of tools out there available for Amazon sellers.
You can also follow step by step methods and strategies that are proven to work and get your listing to the front page of Amazon search results. So it’s been proven, it’s it’s a systematic method. Now, let’s go ahead and dive into competition between both of these models. Now I’d say that there’s a different nature of competition between shops, Shopify drop shipping and an FBA with Shopify there’s something that I like to call indirect competition, meaning that you won’t find competitors directly close to your store.
There are going to be, of course, other shops that sell the same product because, of course, your drop shipping, but the difference is in Amazon. The competition is literally one click away on your listing itself, there’s going to be other advertisements for the exact same product from other brands. So let’s say, for example, if you search for yoga mats, you can find up to 3000 results. Okay, so keep in mind that there’s always competition in both business models.
That’S why finding a good product and a good niche with less competition is always going to be crucial for your success. But I would say in this situation: it plays a more crucial factor in Amazon FBA, because you know the barrier to entry to marketing your listing is very low okay, so the next thing to talk about is price factor. Okay related – and this is loosely related to competition on Amazon, we could say that price plays a massive factor if you’re selling online, if you have competition with a ton of other people, unlike unlike Shopify, where they’re just on your store, you know and they’re unlikely to Go and search on other blogs on Amazon competition is literally found on the same page, so pricing is going to be a massive factor, but there are certainly ways to make it work.
There are certainly ways to be a top Amazon seller and to compete on things. Other than price, like reviews, you know, ranking doing giveaways all that kind of stuff, making sure good images and you can focus on adding more values by offering more features or bundling your products or doing better copywriting and keyword. Optimization, alright, so profit margins. Let’S dive into the thing that you really really want to understand and figure out what is more profitable between the two Amazon, FBA or Shopify dropshipping.
Both methods are course good options for making money online, really just depending on the circumstance. The entry or the very, entering the dropshipping world, I would say, is very low. Drop shipping suits people who are new to the online business space and have a small initiative initial budget when getting started. It also really benefits people who have existing knowledge and experience of how to drive traffic using things like Facebook or Google AdWords.
But that also means a lot of your product. Margin is going to be spent testing audiences and using your budget with potentially little return on. The other hand, Amazon FBA, offers awesome opportunity to generate a lot of income online with less marketing costs, but there requires a lot more capital for inventory to get started. I would recommend at least three to five thousand dollars, and if you know you really want to make it work, I think ten thousand dollars is a fantastic amount to get started with.
Another thing to note is that, in working with a drama class, your supplier margins are usually lower than if you were to private label. Something to sell in Amazon with higher risk usually comes higher reward and the higher risk is taking on that inventory risk. But the reality is that you know whichever one you choose just be aware that either will take working capital to get started and you need to treat them both like a serious business in order to succeed so real quick interruption guys I want to first.
Thank you for staying with me this far, I know discuss a lot of things and I think it’s a good time to ask you this. What do you think is Shopify going to work better for you or do you think you’ll get the most return through Amazon FBA I’m going to continue talking, but as you’re as you’re listening go ahead and leave the comments in the below of what you think, which Is going to work best for you now, let’s go ahead and move to another comparison area, which is how sellers can differentiate? Okay, so which model has the best opportunity for someone to differentiate their listing or their product? Now, in Shopify, sellers can have a lot more freedom to differentiate with other online stores through things like branding and marketing.
Here you can do segmented, targeting or tailor the experience and use different advertising tactics based on the Facebook audience profile. There’S a lot of room for creativity here. If you understand the bio psychology of your niche, you can really build a strong funnel now on Amazon ba the customer experience is completely standardized, just think about it. If you buy a product, you go to the listing all listings kind of look the same and they’re your very few ways compared to let’s say a Shopify store that you can differentiate from the competition, but this can also be an advantage because Amazon has incredibly high Conversion rates and that’s because Amazon again it has gained the trust of millions of people and people go to the site with the to make a purchase.
If you think about it, if you were sent a Facebook ad for e-commerce store right, if that’s not always the case, someone III know I personally clicked on an ad just to see what the company is about to see what they’re selling without even purchasing anything and So that’s usually not the case. With Amazon people aren’t window shopping as much. They go there with the intent to buy something. So let’s go ahead and dive into the next comparison, which is customer service.
So let’s go ahead and dive into the next comparison, which is customer service. Now, with Absolut VA, you have to remember that Amazon already takes care of customer service and Amazon PA sells will be less hands-on with this aspect, which means it’s a way more passive way of producing income, at least on tail end of the model. Now, with private labeling, most of the work is done upfront once the products are shipped into the warehouse.
Amazon takes care of all the fulfillment work for you, including customer support like returns, and that makes it really passive drop. Shipping, on the other hand, requires that you check every day for the orders and that you fulfill them. It’S actually in really really manual process. Of course, you can also hire out the work to a VA once you’re successful, but in the beginning it’s going to be a manual process and it’s not going to be automated and with the drop shipping story, you might find yourself answering questions and emails chatting to Customers on live chat or even talking to customers on the phone just to get a sale.
You might ask to have to deal with refunds returns and that’s a tricky one, because where did the returns go to? If you don’t have a warehouse and complaints, because you’re the middleman between the supplier and the customer customer service is incredibly time consuming and it becomes a daily task that you either need to do or hire someone to do it for you with FBA Amazon, how it Handles most of this for you there might be.
You know the occasional message within Amazon which you should respond to, but you’re not spending your days talking to customers. One-On-One people can call Amazon directly and that’s an incredible part of the Amazon FBA experience. Now, let’s go ahead and dive into the next next comparison, which is quality control, and I think this is a major one that a lot of people don’t talk about. So if you think that Shopify sounds less risky, you have to know that there are so many physical parts of business, physical aspects of business, our can out of your hands, so you might have to commit to let’s say a high packaging quality, quick handling and shipping Time, stock and availability and the reality is with drop shipping.
A lot of these aspects are completely out of your control. You need to rely entirely on your dropship supplier and they’re, probably on the other side of the world, and have a different business culture from you. Unlike with Amazon FBA, you could hire inspection companies and they can make sure that you get a good product and it’s a physical thing that you touch okay, guys. So I’ve already discussed pros and cons.
Now, let’s go ahead and just talk about the benefits of both. Do these business models, one major benefit is both these online businesses are online right, and so that’s really massive. You don’t have to have a physical store, which is great. Both both are trusted models. Secondly, a lot of you that are reading this article, because you’re probably working full time job and it doesn’t give you the freedom or income and you want, and so both of these models give you an opportunity to earn so much more than you would imagine.
It’S great for supplemental income, whether it’s drop, shipping or Amazon FBA. You can have the flexibility to work, your own terms and be financially independent. This way, you can actually do so much more and have more fun things to do like traveling or enjoying more time with your family, and the reality is that both models can work from anywhere around the world, meaning that you can work location independent.
As long as you have an internet connection and a laptop, you can really run both businesses pretty easily from a computer. Another thing to consider is that both required sellers to hustle a lot in the early stages. It’S not an easy thing to do now. Sellers have to find a unique competitive and an advantage in order to stand out above the competition and generate substantial revenues, and the biggest advantage is that you don’t require a brick and mortar store for making your business.
So this makes this saves you from doing a lot of capital investment in the beginning of your business, which is really just tiresome and scary for any new entrepreneur all right. So now you should have all of the information that you need to know to get started on dropshipping or Amazon FBA. But let me ask you this: if you have a successful business, what would you do with your money now before I end in this article? Let me give you just a brief conclusion: remember dropshipping Sue’s people that are new to online business and small initial budget getting started, and it also benefits people who want to get exposed to a range of different areas of the e-commerce and digital marketing, which I shouldn’t Understand and if you’re new, you should expect to have a steep learning curve with Amazon FBA.
On the other hand, there are amazing opportunities to generate a massive amount of income with less work, but it might require a lot more initial investment to get started. Now, if you have a higher risk tolerance and have the budget to start with Amazon FBA, this might be great for you and it will provide you a massive opportunity to bridge seven and eight figures just like us, but just like any form in business.
Both Amazon, FBA and Shopify drop shipping requires a lot of hard work. Dedication determination to succeed so whether you’re selling via Shopify drop shipping or three Amazon FBA. The key is just do a lot of research and put a lot of effort. So that’s it guys. Thank you for reading and if you find this article helpful, then thumbs up and don’t forget to subscribe, because we’ll have a lot more upcoming articles that will help you build a sustainable online business that you can use to create personal and financial freedom.
Good luck, guys! Bye for now and I’ll see you in the next article you
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