The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

Dropshipping vs Amazon FBA

LPPC

Bronze Contributor
Mar 6, 2016
316
271
129
28
Hello fastlaners,

I am currently dropshipping on Amazon with a very reliable dropshipper. I don't have my own inventory as of now and have never used Amazon FBA before. I have to decide whether it is better for me to have my own inventory/do FBA instead of dropshipping. I have 12K USD to work with (saying this just in case this would influence your answer.

My question to you guys is: What are the pro's and con's of having your own inventory/doing FBA? For example: is it a real hassle to import and restock or is it pretty straightforward when you get the hang of it? I've never imported before so I have no imagination as to what kind of difficulties it would bring along.

The advantage for me that I know of when choosing FBA/having inventory is that I will get twice as much profit per sold item because my dropshipper is pretty expensive and I can buy more stock using the money I have. So I will have higher margins. But as of now dropshipping is pretty easy and it goes really well, so I'm looking to figure out whether the switch is worth it.

I would appreciate some answers from you guys who have experience with having inventory in general and using FBA.

Thank you very much! :praise:
 

Don't like ads? Remove them while supporting the forum. Subscribe.

JasonR

Maverick
EPIC CONTRIBUTOR
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
May 29, 2012
2,026
10,392
2,556
Traveling
This is a hard question to answer.

Are you reselling someone else's product? If you're dropshipping I presume you are.

Are the items big and heavy?

Have you considered the additional sales volume increase with FBA - not just the profit margins?

Have you projected your cash flow needs if you hold your own inventory? If they are cheap products $12k should float it fine, but perhaps not if your goods are relatively expensive.

If you're selling someone else's product via dropshipping, you're playing a losing game. If you found a profitable niche and have some free cash it's a no brainer to import and brand your own product.

Tell us more about your situation.
 
OP
OP
LPPC

LPPC

Bronze Contributor
Mar 6, 2016
316
271
129
28
This is a hard question to answer.

Are you reselling someone else's product? If you're dropshipping I presume you are.

Are the items big and heavy?

Have you considered the additional sales volume increase with FBA - not just the profit margins?

Have you projected your cash flow needs if you hold your own inventory? If they are cheap products $12k should float it fine, but perhaps not if your goods are relatively expensive.

If you're selling someone else's product via dropshipping, you're playing a losing game. If you found a profitable niche and have some free cash it's a no brainer to import and brand your own product.

Tell us more about your situation.
Thank you for your response. Those are indeed good matters to take into consideration. I am mostly selling generic trending products as of now but that will change in the near future for sure. I will slowly move into selling long term products.

But for now I wanted to figure out whether it is a wise idea to start having my own inventory for these trending products. So I was just curious about your experiences with importing products. Having less money but in return having less stress is worth it for me. So I was wondering whether importing brings lots of headaches with it or whether it is pretty straightforward when you've gotten familiar with it. Pretty hard to imagine the possible difficulties with importing when I've never imported before ;)
 

ProblemOd

Silver Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jul 27, 2014
412
749
298
New York, New York
Make sure to use FBA calculator to check the fees if you havent already. Fulfillment by Amazon Revenue Calculator

I've only ever done FBA so I don't know if there is any downtime switching from seller fulfilled to FBA, but if its not a big deal I'd say why not go for it. You have something thats selling already, and you get to learn about branding it and the whole importing process.

My friend was dropshipping on Amazon and I think now he moved all his items to FBA.
 

RobD88

Bronze Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Nov 20, 2017
196
477
222
Missouri
My opinion is that if you are not familiar with or comfortable managing inventory I would stick with drop shipping. Based on your answer that you are selling generic, trending products you stand the chance of getting stuck with dead inventory which is a kiss of death for cash flow and profits. Trends tend to end and if you do not catch the life cycle of the product at the right time you may end up with a warehouse full of stuff that won't sell. The extra money you make with reduced fees could easily evaporate overnight.

If you get into more niche or branded product that you control then managing your own inventory makes more sense.

Again...just my opinion.
 

ceciliali

New Contributor
Mar 17, 2018
4
4
13
37
China
The pros of FBA is that you don't need to deal with customer service, Amazon will handle this for you. No need to track for delivery because Amazon will do that.

The cons is that you need to get ready for any refund without your permission but just an email to inform you from Amazon. And it is hard for you to contact the buyer, their phone number is hidden, you can only contact buyer using an email which is encrypted too.

Just my 2 cents hope this can help.
 

Real Deal Denver

Gold Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Jan 13, 2018
822
1,922
543
65
Denver, Colorado
The pros of FBA is that you don't need to deal with customer service, Amazon will handle this for you. No need to track for delivery because Amazon will do that.

The cons is that you need to get ready for any refund without your permission but just an email to inform you from Amazon. And it is hard for you to contact the buyer, their phone number is hidden, you can only contact buyer using an email which is encrypted too.

Just my 2 cents hope this can help.
What if the refund is for something out of your control - like the customer saying they never got the merchandise. I didn't ship it, so I don't want to be responsible for it.

Also, what if the customer says they just didn't like it. Too damn bad. You saw the photos - you bought it - you own it. Or they say it was damaged? Like ebay, I can see all kinds of ways of getting ripped off by customers.

Side note - I collect beer steins. Very nice steins. I once received one that had a broken piece. As a collectors item, it was worthless to me, but it could have been repaired and admired by someone that wasn't a collector, so I decided to give it to a friend of mine that wouldn't care about the repair. No - that wasn't good enough. God forbid I might give it to someone, or sell it for a few bucks maybe. I had to destroy it and email pictures of it being destroyed before the seller would be reimbursed by the shipping insurance, which I did. So, into the garbage it went after it was smashed. Those people are way too smart for my plans, I guess... yeah, right.
 

ceciliali

New Contributor
Mar 17, 2018
4
4
13
37
China
What if the refund is for something out of your control - like the customer saying they never got the merchandise. I didn't ship it, so I don't want to be responsible for it.

Also, what if the customer says they just didn't like it. Too damn bad. You saw the photos - you bought it - you own it. Or they say it was damaged? Like ebay, I can see all kinds of ways of getting ripped off by customers.

Side note - I collect beer steins. Very nice steins. I once received one that had a broken piece. As a collectors item, it was worthless to me, but it could have been repaired and admired by someone that wasn't a collector, so I decided to give it to a friend of mine that wouldn't care about the repair. No - that wasn't good enough. God forbid I might give it to someone, or sell it for a few bucks maybe. I had to destroy it and email pictures of it being destroyed before the seller would be reimbursed by the shipping insurance, which I did. So, into the garbage it went after it was smashed. Those people are way too smart for my plans, I guess... yeah, right.
On Amazon, customers are always right, did you heard the news that a couple scammed amazon for $1.2 million? They are not found out and report by Amazon anyway.
Here is the link Amazon Scam: Couple Owes $1.2 Million For Stolen Electronics

If something out of your control happened, you afford the loss as a FBA seller, I used to see the refund reason is "I don't know what I am buying, refund".

If the item is damaged by Amazon during its delivery, customer require a refund because of this, it is very possible Amazon eat this loss, but still, they will count this refund to your seller performance.

In one word, Amazon is a fair platform 65% for the customer, and 35% for sellers. This is only my personal opinion. I have no means to offend Amazon. Hope this help.
 

Real Deal Denver

Gold Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Jan 13, 2018
822
1,922
543
65
Denver, Colorado
On Amazon, customers are always right, did you heard the news that a couple scammed amazon for $1.2 million? They are not found out and report by Amazon anyway.
Here is the link Amazon Scam: Couple Owes $1.2 Million For Stolen Electronics

If something out of your control happened, you afford the loss as a FBA seller, I used to see the refund reason is "I don't know what I am buying, refund".

If the item is damaged by Amazon during its delivery, customer require a refund because of this, it is very possible Amazon eat this loss, but still, they will count this refund to your seller performance.

In one word, Amazon is a fair platform 65% for the customer, and 35% for sellers. This is only my personal opinion. I have no means to offend Amazon. Hope this help.
Very good article - thanks for the link.

The article said: "For Amazon, it’s often cheaper to replace items when these claims are filed than to investigate."

My question, then, is Amazon the one who ate the refund, or was it the merchant?

I see this as too big of an opportunity for abuse - exactly as the article explained. 1.2 Million? At a Gro Pro or tablet being around $500, that's - wait for it - you can't handle the truth - here it is anyway: 2,400 items. Amazon isn't too damn bright it looks like. How much of a trend does it take for them to notice?

What scares me is that this might just be the tip of the iceberg.
 

Real Deal Denver

Gold Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Jan 13, 2018
822
1,922
543
65
Denver, Colorado
What am I thinking? If you can't beat em, join em.

I just ordered 200 Go Pros, 200 MS Surface tablets, 100 i-pads, and a set of barbecue tools.

This might turn out to be my calling!
 

Don't like ads? Remove them while supporting the forum. Subscribe.

JasonR

Maverick
EPIC CONTRIBUTOR
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
May 29, 2012
2,026
10,392
2,556
Traveling
I think there's some misinformation in this thread: you shouldn't be scared of Amazon. I have complete faith in Amazon and Bezos to right the boat and keep people shopping at Amazon. Yes, they will have growing pains for both buyers and sellers, but they aren't going away any time soon.

If you get into more niche or branded product that you control then managing your own inventory makes more sense.
This. I would keep dropshipping the stuff you're doing now. I would start looking for a profitable niche/product(s) you can invest your $12k in and start creating a brand that can grow and thrive both on Amazon and off Amazon.
 

AlessioLC

Bronze Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
Jul 19, 2017
479
444
225
22
France
@JasonR @RobD88 Are right, look at the market, test it, build a brand first with Amazon, when you got enough sales to tell yourself that you got the opportunity to build a real brand, then i would build an e-shop (your own websites) and split the product delivery to your house/office & Amazon FBA, to attract people on both plateforms.

I don't personnally do this now because i'm in the clothing business (POD/Dropshipping with my partner) but a lot of people which i spoked to have done this.
You get a lot more control if Amazon choose to get you out of the game.
 
OP
OP
LPPC

LPPC

Bronze Contributor
Mar 6, 2016
316
271
129
28
Thanks a lot to all of you!

If you get into more niche or branded product that you control then managing your own inventory makes more sense.

Again...just my opinion.
This. I would keep dropshipping the stuff you're doing now. I would start looking for a profitable niche/product(s) you can invest your $12k in and start creating a brand that can grow and thrive both on Amazon and off Amazon.
This sounds and feels like the best and most logical route to go indeed. Thanks a lot!
+repped
 
Last edited:

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.


New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Sponsored Offers

Lex DeVille's - Advanced Freelance Udemy Courses!
-- HALLOWEEN SPECIAL STARTS TODAY! Get any of my courses at Udemy's current best price through Friday! Use code: HALLOWEEN Use any of the links...
Top Bottom