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Which model will be better in 2024?

When selling products on Amazon, you have two different fulfillment options.

Dropshipping, which falls under the FMB category, is a unique business model because you never take ownership of the product. All you have to do is list your product, wait for it to sell, and then send the order to your supplier. As a result, only minimal upfront investment is required.

But which fulfillment method is best for your Amazon business?

What is Amazon FBA?

FBA stands for Fulfillment by Amazon, a service provided by Amazon that handles all storage, order processing, returns, and customer service for sellers. FBA is the most popular fulfillment method among sellers, with 89% of sellers using this service.

Whether you sell private label products or resell products through retail arbitrage or wholesale, FBA is a great way to run your Amazon business.

Advantages and disadvantages of FBA

FBA is a very powerful fulfillment service with many benefits for sellers. Although there are many benefits to using FBA, there are also some drawbacks. Now let’s take a look at them.

Advantages of FBA:

  • Convenience. Sellers send their inventory to Amazon’s fulfillment centers, and Amazon handles the picking, packing, and shipping.
  • Prime. When a product is shipped by Amazon, the product automatically displays a Prime shipping badge in your listing.
  • trust. When customers see the Prime badge, they have more confidence in your product. The customer knows that he can receive the product within 2 days.
  • customer service. All customer service for orders fulfilled by Amazon is handled by Amazon.
  • Return value. If a customer needs to return an item, Amazon will process the receipt of the return.
  • MCF. Amazon FBA allows sellers to fulfill orders on other e-commerce sites using multichannel fulfillment.

Cons of FBA:

  • standard rate. Depending on the size and weight of your item, FBA fees may be high.
  • Storage fee. In addition to FBA fees, sellers must pay monthly storage fees and long-term storage fees if inventory is stored for more than 365 days.
  • Restock limit. Amazon has inventory limits for each storage type, so you may not be able to ship as much inventory as you would like.
  • Loss of inventory. Please note that Amazon may lose some inventory during the receiving process, but you will be refunded for the lost inventory.

What is dropshipping?

Dropshipping is when sellers list products for sale online and have suppliers or manufacturers ship them to them without purchasing the inventory first. Dropshipping is a popular business model for Amazon, eBay, and Shopify sellers because it’s easy to get started and doesn’t require a large upfront investment.

Sellers who dropship products on Amazon have strict guidelines that they must follow or Amazon will suspend their account. For example, Amazon prohibits sellers from accepting dropshipping orders from other retailers such as Walmart.

Seller must appear on all invoices, packing slips, and packaging, and does not make any reference to the supplier or manufacturer that shipped the product.

Advantages and disadvantages of dropshipping

Many new e-commerce entrepreneurs are attracted to this business model because it doesn’t require a lot of capital to get started. Still, there are some things you need to consider when deciding whether to go with dropshipping. Let’s take a look at the pros and cons.

Advantages of dropshipping

  • low cost. Start-up costs are low compared to other business models such as private label or wholesale, and you don’t have to order products in bulk or spend thousands of dollars upfront.
  • low barrier entry. It’s easy to get started by finding products from suppliers and instantly listing them on Amazon (or another platform).
  • Amazon allows sellers to dropship, but be sure to follow their dropshipping policies.

Disadvantages of dropshipping

  • fierce competition. Since it is much easier to start dropshipping, there is also a lot more competition.
  • delivery is slow. Depending on the supplier or manufacturer you work with, delivery times may be delayed.
  • lack of quality control. Since the products we sell come directly from the manufacturer or supplier, we have no way of controlling the quality of the products. We recommend ordering samples from the supplier before making a decision.

What is the difference between Amazon FBA and dropshipping?

These two fulfillment methods are quite similar except for the following: Who owns the inventory?. In both cases, the way orders are processed for customers is completely hands-free and handled by another company.

  • Who owns the inventory? The big difference between Amazon FBA and dropshipping is that with FBA you already own your inventory and use Amazon’s fulfillment network to fulfill your orders. For example, if you sell private label products, you place large orders with suppliers in advance and send the inventory to Amazon FBA fulfillment centers.
  • When will the supplier ship my order? With dropshipping, you don’t have to pay for your inventory until you receive an order from a customer. Once you list the products you want to sell and receive orders, you simply place the order with your supplier and the supplier ships the order to your customer.
  • Who handles customer service? Another difference is that when using FBA, Amazon handles customer service and returns.
  • Where do my returns go? Even with dropshipping, you, the seller, are responsible for returns and customer service since Amazon uses the FBM fulfillment method. Returns cannot be returned to the supplier or manufacturer.

Which business model is right for your business?

At Jungle Scout, we strongly support FBA and recommend it. Of course, it’s up to you to decide which business model is best to follow when selling on Amazon.

Amazon Dropshipping vs. FBA: Our Decision

  • Dropshipping. Dropshipping has lower initial costs, but slower delivery times and more difficult product quality control. With FBA, Amazon handles all fulfillment and customer service, plus your products receive a Prime Shipping badge.
  • F.B.A. With FBA, Amazon handles all fulfillment and customer service, plus your products receive a Prime Shipping badge.

What do you prefer in your business? Let us know in the comments!

Want to learn more about how Jungle Scout can help you start, grow, and run your Amazon business? Click the Learn More button below.

We will start selling on Amazon from today.

Learn more about how to use Jungle Scout to launch, grow, and run your Amazon business.

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