Today I’m going to answer to a super common question that we get asked a lot, which is Amazon FBA VS dropshipping 2019 which makes the most money? If you know what these business models are, then I have some great articles that you can read on this blog. So I’m going to answer which one of the models make the most money? But I’m going to compare them when it comes to other important points as well, such as which is the cheapest for newbies to get started with and which one is the most passive?
Question 1# which is cheaper to get started?
To get started with drop shipping, you’re going to need the following things:
1- Products to sell
2- An online store
3- Money for advertising
Because of the fact that you’re drop shipping, you don’t need to purchase any items in advance, because you only purchase items that customers have already bought from you, and usually, you will be selling items that cost less than $10 to fulfill, so you would need very little startup money. Now let’s move on to starting an online store, when it comes to this, you’ve got two options: Firstly you can start a Shopify store and this is usually what I recommend to beginners because it’s super easy to use, Shopify costs just $29 a month and they have a free app Oberlo which helps you automate the drop shipping process. But of course, if $29 a month is too expensive then you could start a WooCommerce store. And of course you will need one final thing: money for advertising, just to be clear this is optional, you could be using a free traffic method like SEO or building up a Facebook fan page, but I suspect that most of my subscribers here plan to be using paid traffic. And if you do that you’ll be running short one week ads for the products that you’re testing, you run the ad and see if it’s breaking even or making a small profit and if it is, you scale up from there, this costs money but you can start with tiny ad budgets as low as $3 a day, this means it can cost as little as $21 to test a product and while you’re testing the product you will make sales, even from products that aren’t breaking even, you can then take that money and reinvest it until you find a winning product. You can do this gradually even if you don’t have that much money to get started, that means then that if you’ve got, the weekly budget of $50 then you can test two to three products a week.
Now let’s compare that with private labeling with Amazon FBA, immediately you’re going to need to order stock in inventory and the chances are, you’re probably going to need at least 200 units, ideally, you’ll be running a lunch marketing campaign where you’ll be giving away products using coupon codes, and also using paid traffic to drive fast sales. Ultimately you can be looking at easily a thousand dollars to get started with Amazon FBA, so I think that dropshipping is the best in this case.
Question 2# which business model is most passive?
When it comes to dropshipping you’re going to need to add to do a lot of things to keep your business running. Firstly every day you’re going to need to check to see if you’ve made any sales, next you have to actually fulfill those sales, with apps like Oberlo you can greatly streamline the process but at the end of the day you’re still going to need to fulfill the sales and when I say to fulfill the sale I mean you’re going to need to order the item from the Aliexpress seller and then get it shipped to your customer, you’re also going to need to be watching your email inbox and answering questions customers because of the fact that you’ve got long shipping times from China you’re definitely going to be receiving quite a few emails from people, so you need to be staying on top of your customer support.
In addition, you’re probably going to be running ads on Facebook so you need to be monitoring those and adding new ones as well, once you’ve got an established store you can certainly hire VAs to help you with these tasks and to make it more passive. Let’s turn to Amazon FBA, once you find your product, manufacture it, ship it into the Amazon FBA warehouse and run you lunch promotion, there isn’t a lot more than you need to do and the work for private labeling is upfront, you do your research, you manufacture the products you run your lunch promotion and from then on out, it’s hands off. Why! This is for two reasons: 1) Amazon handles fulfillment for you, when it comes to dropshipping it’s up to you to watch for orders and then to fulfill the order for your customer, but when you sell using the FBA program, Amazon takes care of all of that for you, they store the items in their warehouse and when a customer orders it from them, they go find it and then ship it out to them, all the while you do nothing. 2) Amazon handles the marketing for you if you run a good lunch promotion, and they should be sitting at the top of the Amazon search result for the keywords that you were targeting. And every day people would be coming to Amazon searching for your keywords, finding your item and then buying it, all the while you don’t have to do anything, the most important thing that you need to be doing as an Amazon FBA seller is watching your inventory levels and making sure that they are healthy, but all that day to day hands-on stuff, you can let Amazon do that for you. So I think in this case here Amazon FBA is the best.
Question 3# Amazon FBA VS Dropshipping, what makes the most money?
With drop shipping, you can sell and test a lot of products without having to wait to manufacture inventory. And if you find a winning product it can earn you tens of thousands of dollars a month, that means that if you get really efficient and build your VA team, then you can legitimately scale to over a million dollars in a single year, I myself have never personally scaled this big but I ‘ve had several friends and guests in this blog who have shared in emails how they did this. Plus with dropshipping you have the big advantage that people are coming to your personal store, what this means is that you have power over what is happening to the customers since they are coming to your site that you control, which means that you can add upsells to your products which greatly increases the amount of money that you make per order. And you can have Facebook pixels to your website so that you can catch the customers who are more targeting on Facebook, and of course, you are collecting their email addresses for further remarketing. Let’s turn around and look at private labeling with Amazon, obviously there’s a lot of money to be made, but let’s be honest scaling is not going to be as fast, you can immediately sell products, you need to manufacture them, private label them and then ship them into the Amazon warehouse, plus you’re selling them to Amazon’s site and not your own, you don’t have control over what items Amazon upsells them on, because Amazon most recently upsells to customer on more products but they get to choose what the products are, and oftentimes they’re not going to be yours, they’re going to be your competitors, plus you have strict limitations over how you’re allowed to email your existing customers and obviously you don’t get to pixel them either, in this case dropshipping is the best.
Question 4# which business model has the least risk?
Here’s the thing with drop shipping, the key is to test different products with ads and see which ones connect and which ones don’t, unfortunately, most products won’t connect, you’re going to test a lot of different products before you find winning ones, the average that we’ve noticed to the industry is that you tend to test about 20 products to find 1 winning item but that is just an average, but might be super-duper luckily and find that your first item is winner or it might take you 50 products to find a winner there is no way to know. Let’s look at Amazon FBA if you’re doing that right, you are not testing lots of different products to find a winning item, instead, you have access to a huge bank of data so that you can immediately spot a winner. Using Jungle Scout you can see how many sales are being made for similar items every month, and you can see if item less thing that is poorly optimized are still making sales, and with that data you can then go find an item that is making lots of sales even for competitors which have product listings that are poorly optimized, you can then private label, manufacture it and then optimize your product listing so that it’s better than the competitors and sell. And if you claim your two week Amazon lunch strategy right, then you are following a proven formula for rising to the top of the Amazon search engine result for the keywords that you are targeting and then you will make organic sales. With private labeling there is no guesswork, using data you pick your winning product and then using your lunch product following a proven formula and then you make your money, in this case, Amazon FBA is the best.
Question 5# which is the best for free traffic?
For long-time subscribers here at Meshrange you know that I have a soft spot when it comes to free traffic, why? Because usually when you’re getting free traffic you’re getting it from search engines and I personally love manipulating search engines.
Some people like to spend their time skiing, some people like to cook, I like to spend my time manipulating search engines, so what is a search engine? The best example of a search engine is Google, you go to Google you type in term of an item that you’re looking for and then Google will give you a list of pages that it thinks best matches what you are searching for. Because the store is ranking for keywords like that it means that they are getting free sales from people coming to Google, typing in an item and then finding their store, but here is the thing about ranking for keywords in google, it is slow, it can take weeks even months for Google to move your website up the search results. If the keywords that over your competition, you are going to need to spend your time or your money into something that is called backlinks, optimizing your SEO metadata is just not enough. Explaining backlinks to my viewers here that don’t know what they are far, too complicated for this article but let me just say that they are a huge pain. So even though so you can get free traffic an Aliexpress dropshipping store, it isn’t something that I would recommend. Let’s compare this to private labeling on Amazon, honestly, there is no comparison, private labeling rocks when it comes to free traffic, you see when you sell at Amazon you have access to another search engine and that is the search engine on Amazon’s site. In fact on Amazon, roughly 90% of sales come from organic traffic and just 10% of sales come from the paid ads that you can purchase on Amazon’s site. So if you are doing the private label business right then it will be built upon the idea of creating a product which sits at the top of Amazon search result, so let’s say you did your research and you discovered that for some reason, there was a huge opportunity to sell aluminum water bottles on Amazon, your goal would be to create your listing so that when people type aluminum water bottle into the Amazon search engine, your product appears on the first page of results, and luckily unlike the google search engine manipulating the Amazon search engine is really easy and really fast, so the best in this point is Amazon FBA.
Question 6# which is the best for paid traffic?
With Aliexpress dropshipping you get to take full advantage of paid traffic, you can test lots of products and find super winning items, and importantly you can get those ads running up within days if you wanted to, why? Well, because you don’t have to wait a month to manufacture products and then ship them into the Amazon FBA warehouse. With Amazon, it’s very different of course if you’ve got a successful product listing, then it is a fantastic idea to run paid traffic to it. You’ve got one product, and if you want to run more, then you’re going to need to have to go, find a new product, manufacture it, ship it into the Amazon FBA warehouse and then you get to run ads for it. So if you like working with paid ads and traffic then there is no contest and in this case, the drop shipping is the best.
As you see there’s no right or wrong choice here when we talk about Amazon FBA vs drop shipping, you need to pick the right business model that suits you. Comment below and let me know which business model that you prefer, thanks for reading this post if you liked it I’d appreciate if you gave a share and if you want more articles to subscribe to my newsletter at Meshrange.