Shopify Dropshipping Vs Amazon FBA: Which One Is Better in 2020?

On the one side, you have Amazon FBA, which appears very lucrative. On the other hand, Shopify Dropshipping winks at you with dozens of eCommerce apps offering an opportunity to grow your own business. If you don’t know which one to pick up, keep reading. We will help you make an informed decision.

Jumping immediately on your business idea might not be as good as you think it is. Getting all the information you need is the best way to ensure you make a good business decision. When it comes to Shopify Dropshipping and Amazon FBA, one thing is certain. They can both enable you to launch profitable business models.

However, Shopify Dropshipping and Amazon FBA are far from being the same thing. The only thing they have in common is that they are eCommerce business models. In this guide you will be able to learn what Shopify dropshipping and Amazon FBA are, what makes them different, and which is probably a better option for you in 2020.

What is Shopify Dropshipping?

Shopify offers entrepreneurs with an opportunity to launch their business from scratch and sell products directly to the customers. In 2020, Shopify became the largest ecommerce platform, making it easier for entrepreneurs to get started with their dropshipping journey. With the dropshipping model, entrepreneurs don’t have to worry about:

Stocking the items
Packing the items
Shipping the items

If you have an excellent new product idea, Shopify dropshipping is one of the best ways to put it to test. It is also cost-efficient as you won’t have to spend a dime on purchasing products upfront. In fact, you don’t have to own the product in the first place to be able to sell it.

When you have the opportunity to save cash on inventory, you can pursue other methods to boost your sales, including social media and PPC marketing.

Why Choose Shopify?

If you are considering starting a dropshipping business then it’s a good idea to pick Shopify as your ecommerce platform. Shopify is by far the most popular ecommerce platform in the world, with close to a million entrepreneurs using it to power their businesses.

Shopify has one of the biggest ecommerce App Stores catering to every possible need or want that an entrepreneur might have. You can use these services to build an online shop, conduct a more effective market and product research , use prebuilt apps to add whatever feature you want and choose whichever payment gateway you want from the hundreds of gateways in Shopify offers.

With Shopify, there are plenty of ways to connect to the suppliers. You can directly contact the suppliers, or browse through supplier databases to find the best ones. However, Shopify comes with an app that connects you and your store with reliable and trustworthy suppliers.

Collaborate with Wholesale and Retail Store Suppliers

When it comes to suppliers, Shopify comes with no restrictions. You can work with wholesale and retail store suppliers. You should bear in mind though that your profit margin will be significantly bigger if you collaborate with wholesalers because they buy products directly from the manufacturers.

The most popular option when it comes to Shopify Dropshipping is to use AliExpress suppliers – a Chinese ecommerce marketplace specifically catered towards Western consumers. AliExpress has really set the gold standard in the recent years, where providing great communication, fast shipping and low product pricing became the norm.

Benefits of Shopify and Dropshipping Synergy

To be able to evaluate your business idea, you have to get acquainted with the benefits of dropshipping and the specific benefits of doing it through Shopify. Let’s start with the benefits of dropshipping.

Low Startup Requirements

Dropshipping is perhaps the least requiring eCommerce method both in terms of knowledge, time, and money. Even if you don’t know anything about it, there are hundreds of high-quality guides and video materials to help you go from zero to hero in a matter of days.

You can do the entire dropshipping research on your own without spending cash on market studies and keyword research. There are even free tools to help you identify the items that are in demand at the moment. Simply hitting Amazon best sellers provides you with valuable insights you can use to fuel your eCommerce strategy.

You should also forget about the costs related to warehousing, inventory management, packaging, and shipping. All you have to do is find a hot product and connect it with your target customers.

You Get to Choose What You Want to Sell

There are literally thousands of wholesalers worldwide looking for partnerships. The sky’s the limit – you can sell anything you want if you choose dropshipping.

This also applies to the products that require specific warehousing conditions and transportation. If you identify the market opportunity, you can pursue it anytime you want.

You Don’t Have to Worry About Inventory Management

Juggling inventory and product demand is a daunting task. In top-notch eCommerce establishments, there are entire teams of people responsible for this task. You can let out a sigh of relief because with dropshipping the inventory is none of your concern.

Yes, this means that you won’t be able to control quality or branding, but if you stay tuned to your customer feedback, you will learn quickly which suppliers to keep and which ones to let go.

It is Time Efficient

Having to pack and send a couple of products a day is not a big deal. But imagine the time and effort it would require if you had to pack and ship hundreds or thousands of products on a daily basis.

With dropshipping, you will ultimately become time-efficient. You won’t spend a second on anything related to your products apart from listing them out on your eCommerce store.

Ok, maybe all of this sounds familiar to you, leaving you to wonder, “What can Shopify do for me when it appears that I can do everything on my own?” Here is how Shopify fits in your dropshipping idea.

You Get Instant Website

Shopify a complete eCommerce suite. It comes with all eCommerce related perks you can use at your convenience. Even the free trial users can benefit from some of the features.

If you want to get an eCommerce website built from scratch to get ready to spend a fortune, you will have to pay web designers and developers, domain name, and hosting. All of these costs sum up to several thousand dollars.

With Shopify, you can bring your dropshipping idea into reality instantly and at a really affordable price. Last time we checked Basic Shopify, the monthly subscription was $29, no strings attached.

Using Shopify Features Requires Minimal Technical Knowledge

Building your own website from scratch even if you decide to use WordPress/WooCommerce combo requires technical knowledge. You simply can not expect results if you don’t know how to build pages, connect payment gateways, automate emails, and manage landing and product pages.

Shopify makes all of this simple. You can build your web store ground up even if you have a minimal technical background. With drag and drop editor and installation and setup wizards, you can make a functional online store in a couple of minutes.

Get Connected With Wholesalers Via Shopify App Store

While Shopify is an online platform that specializes in all-things eCommerce, it also offers great tools to people interested in the dropshipping business model. Adding new sales channels to your online store is as simple as clicking on one button and selecting from a variety of wholesalers.

More importantly, all the wholesalers featured on Shopify’s platform are reputable companies with experience in dropshipping. You can simply jump the wagon instantly and start selling products immediately after adding wholesalers to your website.

Improve the Functionality of Your Online Shop With One Click

There is one more benefit of dropshipping-Shopify synergy – the ability to custom-tailor your online shop functionality. If you run a standard eCommerce website adding a new feature costs time and money. Developers have to code it and add it to your website while making sure it doesn’t come into conflict with other features.

Shopify allows you to add/remove features to your online shop with a simple click of a mouse button. On top of that, it’s perfectly optimized and tested so that you can’t bring your website down. Simply put, everything works perfectly, ranging from the simplest to the most complex features.

Disadvantages of Dropshipping

Undeniably, all of the above benefits make dropshipping a very attractive and beginner-friendly business model. However, it is worth noting that dropshipping also has it’s downsides: Flexibility and convenience come at a price and whether that price is worth it or not depends on what your goals are.

Low profit margins

This is perhaps one of the biggest disadvantages when it comes to this business model. Since it’s easy to get started and overhead costs are very minimal, the barrier to entry is also very low, meaning that the competition is high. This means that what business owners will often do is to sell their products at rock-bottom pricing in an attempt to grow their revenue through sales volume.

Such relentless profit pursuit often results in poor-looking sites and non-existent customer support. Nevertheless, this won’t prevent the customers to comparing their price to yours. Fortunately this can be mitigated by being creative when selecting your niche and potentially selling high-ticket items where there is more freedom with the price setting.

Shipping complexities

Shipping can get a bit complicated when you’re dealing with multiple suppliers, especially when you need to use more than one supplier to fulfil a single order. This type of scenario might arise with big orders, where customer order a variety of different items from your store. The more separate suppliers you use for each order, the higher the shipping cost. This can ultimately affect your profit margins.

Limited customization

With dropshipping (unlike with print on demand, for instance) there are only limited customization options and you don’t have much control over the final product you’re selling. Whilst, some suppliers will be able to customize product, this will come at an extra cost and will often require a certain minimum order quantity in order to be feasible.

Amazon FBA

Not that long ago, Amazon launched the Fulfillment by Amazon (FBA) program specifically developed to cater to the needs of entrepreneurs. Amazon is a leader in the eCommerce industry, and over the years, it has amassed a huge audience. Via the FBA programme, Amazon provides storage, shipping and packaging for the sellers. Those are arguably the hardest aspects of any commercial enterprise, relieving the heavy burden from the sellers, allowing them to focus on other aspects of their business.

With Amazon FBA, sellers are able to ship all of their items in bulk to the Amazon fulfilment center, storing them in warehouses until they are eventually sold. Once the sale is made, Amazon employees fulfil the order, package it and ship it directly to the customer.

When it comes to sales opportunities, you should be aware of some restrictions. Selling through Amazon FBA is not difficult, as long as you go along the lines defined in the FBA Policies and Requirements . However, this puts you within certain limits, which you have to respect since the penalties are pretty harsh, and you can easily lose your Amazon FBA account.

Benefits of Selling Through Amazon FBA

There are thousands of entrepreneurs successfully selling a variety of products through Amazon FBA. It’s obvious that the platform offers attractive benefits. Here are the most noteworthy ones.

Time-Efficiency

Amazon FBA offers warehousing and product packaging and shipping services. If you choose Amazon FBA, you won’t have to worry about this aspect of doing online business. You can focus on sourcing products and optimizing your listings for better results.

These are the same perks Shopify Dropshipping offers with one big difference. Amazon FBA comes with customer care services.

If anything goes wrong with the order or shipment, Amazon handles the customers instead. Amazon has strict returns and replacement policies in place, and Amazon customers are familiar with them. The company will handle returns, and you won’t even know about it.

On the other hand, Shopify doesn’t offer this perk, and you will have to take care of frustrated customers yourself.

Opportunity to Build a Brand

Amazon wants its sellers to become recognizable brands. You will be able to use several brand-building tools on Amazon to turn your business into a successful brand.

However, you will still have to do business over Amazon, and your brand will get associated with the Amazon platform. You should think in advance if you have big plans in the future because using Amazon’s scalability opportunities comes at a cost.

Access to a Huge Customer Base

Amazon’s customer base is huge. There are literally millions of customers using Amazon to shop for products and compare product prices every day. Perhaps this is one of the main reasons why Amazon FBA is so attractive to entrepreneurs.

If you create an Amazon FBA account, you can list products that can reach a million customers, which potentially translates into more profits. However, reaching customers is not guaranteed. You will still have to optimize your product titles and descriptions and use relevant keywords.

Potentially Better Profits

One of the things that are at the center of entrepreneurs’ attention is profit. Selling through Amazon FBA can mean good profits. First of all, since Amazon has a huge customer base with proper optimization, you can significantly improve your sales volume.

Good sales volume can make up for a small profit margin and, in the end, deliver you the results you wanted. Over time you will be able to improve your brand image on Amazon and build trust with Amazon customers. You can leverage these two accomplishments to sell products at higher prices and make even more cash.

Prime Customer Access

Many of the FBA listings are also automatically eligible for Amazon Prime and are displayed on the platform with a clearly distinct Prime logo. This opens all sorts of doors for FBA sellers, giving them access to the huge customer base that only wants items that are shipping in the 1-2 days period.

Subsidized Shipping

Amazon being a leading ecommerce marketplace has long standing relationships with many of the biggest shipping companies in the world. This means that Amazon sellers will pay a lot less than other sellers doing the same type of volume. Additionally, sellers are able to cut shipping costs if their products qualify for the Amazon Prime shipping and FREE Super Saver Shipping. All of those things add up.

Standarized Shipping

All Amazon FBA orders are fulfilled by Amazon in exactly the same fashion as if it was their own merchandise. When someone buys an item from your store, Amazon will source the item from their warehouse, pack it and ship it to the customer. The added benefit of all of this is that the seller can feature Amazon FBA items on his own website, or even on other platforms (provided that their policy allows it) – Amazon will still take care of it.

FBA Fees

There are four kinds of fees that Amazon charges their FBA sellers:

Fulfilment fees: These are charged per unit and are largely dependent on the size of the product. Other factors include packing, shipping, product handing, product returns and customer service.
Seller fees: These are the fees for being allowed to sell products on Amazon, depending on the volume they typically range between 15-18%. There are also hidden fees associated with refunds, which aren’t 100% charged back.
Storage fees: When calculating the storage fees, Amazon takes into account seller’s average daily volume in a given calendar month. Depending on that, the fee is paid out per cubic foot of inventory, on a monthly basis. Another important factor when it comes to calculating storage fees is the size of the product. Long-term storage fees also kick in, once the product spent more than 365 days in the fulfilment center and are added on top of the regular storage fees.
International Shipping: With the newly introduced Global Export initiative, Amazon is now able to ship orders all over the world.

Shopify Dropshipping Vs Amazon FBA: How Do You Decide?

If you only look at the benefits both these options offer, you can easily become indecisive. So, how do you decide? There is one more thing we have to cover before we take a quick look at specific the downsides of selling products via Amazon FBA and dropshipping via Shopify and how they compare.

What makes Shopify dropshipping and Amazon FBA essentially different? If you decide to go dropshipping via Shopify or any other platform, you don’t have to invest and buy products ahead of time. If you wish to sell via Amazon FBA, you will have to buy products before you can sell them on Amazon.

Inventory Related Issues

Inventory management is a very important aspect of doing online business even if you are running a small eCommerce operation. If you are doing business with Amazon, you have to make sure that you have enough products in warehouses. At the same time, you have to be smart about investing your cash as you might end up with products you can’t sell.

On the other hand, dropshipping is care-free. The only problem you might encounter is your supplier running out of products, but you can always find another supplier and still deliver your item within the advertised time-frame (for Shopify Dropshipping that’s typically 2-3 weeks). Also, Shopify has built-in apps that automatically disable ordering for those products.

Consider the Competition

Doing business on Amazon is potentially lucrative – all entrepreneurs know this. That’s why there are thousands of people on Amazon trying to sell the same product. The competition is harsh. Even in the very narrow product niches, you will encounter competitors willing to throw everything at you to gain an advantage.

Shopify dropshipping sails through much calmer waters, and you can start slow and work your way towards scaling up and growing your business. With dropshipping you’re forced to employ your own marketing efforts, meaning that whilst it’s harder at the start (due to the learning curve involved), once you figure out the marketing (ie Facebook ads, Google Ads , Pinterest, etc), you’re good to go.

With Amazon FBA, on the other hand, you’re competing with some of the largest retailers and wholesalers in the world. Whilst Amazon provides you with the free traffic, being the largest ecommerce platform in the world, chances are that you won’t be able to benefit from this, due to how competitive the prices are that they big retailers are able to offer.

Product Types and Restrictions

Dropshipping provides more opportunities when it comes to selling a variety of products. The wholesalers are handling the packaging and shipment, and the whole process doesn’t have to be put inside the same logistical framework.

The situation with Amazon FBA is completely the opposite. There are strict guidelines telling you what you can store in Amazon warehouses and what Amazon can deliver. With Amazon, you won’t be able to pursue every market opportunity you discover, and you will have to run your product ideas through Amazon’s guidelines.

Moreover, Amazon has strict requirements when it comes to bagging and wrapping, in order to ensure that the items arrive to their facilities intact. If you’re not able to meet their requirements, you either have to pay them extra fees, per-item or avoid using their services altogether.

The Problem of Dependency

What if you one day manage to build a recognizable brand on Amazon and decide to say goodbye to the platform and launch your own eCommerce website? Who are your customers? What were their pain points? Unfortunately, Amazon has direct contact with your customers. For what it’s worth, the company can change its policies and decide to remove your store from Amazon. You can’t do anything about it.

Shopify dropshipping on the other hand, gives you total freedom and independence, due to the fact that you don’t rely on anyone but yourself. There is no shortage of suppliers out there, if a certain supplier is not able to fulfil your orders, you can always find another supplier.

Initial Costs

Finally, to start the business on Amazon FBA, you need to have at least some capital because you need to source your products. This includes fulfilment and storage fees. Long terms storage fees, in particular, can really eat away your profits, as you will inevitably end up having oversized or slow-moving items. Some tough decisions will have to be made down the road of whether to get rid of those items or to keep paying the exuberant storage fees.

Doing dropshipping via Shopify comes with minimal initial costs. All you have to do is subscribe to Shopify services, select wholesalers from the Shopify app center, and you are ready to rock.

But if you don't like Shopify, there are plenty of viable alternatives in the ecommerce space.

The Final Verdict

Now that you know all pros and cons of Amazon FBA and Shopify dropshipping, you can make an informed decision. It is obvious that Shopify dropshipping offers you more freedom in terms of product options. It also allows you to start your own business even when you’re on a limited budget. The drawback is that the learning curve is much greater compared to Amazon FBA, as you have to figure out how to market your products effectively.

Amazon does give you access to a huge customer base, but harsh competition, complete dependency on the platform, and high initial costs. All of that renders it a less convenient option, especially if you are new to eCommerce.