The Ultimate Comparison of Dropshipping VS FBA in 2021
None of us believe how long COVID-19 has lasted. Knowing how the world has changed now, I would tell my 2020 self – don’t rush for expansion, because 2021 is all about “Adaptation”.
If you have a physical business, this year would be the biggest change for you and your business. We have seen different business owners and mangers wondering how to kickstart their first online shop in 2021 and don’t worry, we’re here to help you!
It’s never too late, but if you are already operating an e-commerce business, you might think about how to distribute your tasks!
What is Dropshipping?
Dropshipping is an e-commerce fulfillment model, whereby the retailers place orders for their customers to their suppliers, usually a manufacturer and the wholesaler (manufacturer) delivers the orders to the customers directly. It means you as an dropshipper, do not need to take any stocks or initial investment to start your business.
What is Fulfillment by Amazon (FBA) ?
FBA (fulfillment by amazon) is a program well known for its incredible scalability that offers a great opportunity to Entrepreneurs that serve large clientele. This program ships products and offers warehousing services.
Dropshipping vs FBA , What is better in 2021?
Both money making methods have their own pros and cons that we need to consider before deciding which one to choose.
These are the differences between FBA and Dropshipping that will hopefully help you clear your dilemma of which business model to get into.
Dropshipping requires a lower investment when starting an e-commerce business.
In contrast, FBA might require a larger investment since it targets a larger audience and provides product storage services in the Amazon warehouse, sometimes a physical store is also required which isn’t the case with Dropshipping.
In terms of investment, Dropshipping always is in the lead compared to any other business model.
Compared to FBA, Dropshippers pose the risk of having poor shipping quality since the retailer has no responsibility over shipping products to the customers.
Your dropshipping suppliers usually take care of the shipping process and packaging which would be a potential problem if you don’t have a good supplier.
Regarding FBA, the Amazon team is storing , managing and fulfilling your orders to your customers directly.
This aspect is quite controversial, it really depends on your supplier if you choose to go with the dropshipping model.
But, only talking about logistics service, I would say Amazon FBA for local customers would have the upper hand. However, for International customers, FBA might not have the capability to deliver to some countries, therefore, dropshipping might be your option.
FBA has a wider customer base than a Dropshipping store, since Amazon is a brand itself.
Well, when you start a Dropshipping store, traffic is not guaranteed and highly depends on your marketing strategy.
You will need to think about how to stand out from the market, in this case, a niche store serving niche target group of customers might help your online store shine from the rest!
Both Dropshipping and FBA face competition, however, the competition is more intense with Amazon, since it’s basically a pool of quite experienced entrepreneurs, which makes it difficult to enjoy selling as a sole entrepreneur.
Yes, Amazon gives you a lot of free traffic, but it also has a ton of competitors.
Additionally, you are unable to customise your services as everything is under Amazon ‘s standard.
What does it mean? You are basically borrowing customers from Amazon only.
A dropshipper is less likely to have purchased products in wholesale but with FBA, not purchased products remain in the inventory and might be forgotten over time.
Dropshipping experiences fierce competition from retailers selling similar products as you might sell at relatively lower prices, while getting profits in other ways, thus posing tough competition.
For someone who is new to e-commerce, Dropshipping is much easier to start and requires less investment so it is definitely ideal for beginners!
Again, as we mentioned, 2021 is the year that you should distribute your business risks. Dropshipping is definitely a great option for you to test with some new ideas and seasonal products.
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