When developing an online store many business owners do not want to hassle with the storage and shipping of their products. With proper usage of SEO and other Search Engine Marketing strategies, a business can make money by promoting and selling third-party merchandise online. This article will discuss two popular ways of selling online (Amazon FBA and Dropship Services) and which would be more appropriate for your type of business.
Rules for Amazon FBA
Amazon FBA (Fulfillment By Amazon) reduces the workload of online retailers by storing inventory, packaging items, and shipping the products to the consumer. It is required that the business owners purchase their products prior to selling, as Amazon is not a wholesale manufacturer. Amazon stores your products and then distributes the merchandise from its warehouses. Your products are now displayed to millions of consumers worldwide through Amazon Marketplace.
When more than 75% of Americans turn to Amazon for their online shopping needs, some business owners work with the cyber behemoth rather than challenge an already profitable system. Working with Amazon Marketplace allows for a business owner’s product to be showcased to a wider audience and provides the customer with a safe purchasing experience with a brand that they already trust. Many merchandisers use Amazon Marketplace because it does not require a website or any advertising on the business owner’s behalf; however, inventory must be provided to Amazon and must fall under Amazon’s product requirements.
Amazon Affiliate Links
Amazon Affiliate Links is a revenue-sharing business model that is used by 84% of online publishers. Independent business owners and online marketers can make up to a 10% commission (8% for pet products) when customers purchase an Amazon product through a link provided on the business owner’s website.
How To Make Money With Dropship Services
With Drop ship services, business owners can purchase products individually from a wholesaler and have them delivered straight to the customer. The customer is not led to any third party websites or partners, but the business owner is responsible for all promotions, conversion, and customer service. This method is used to keep consumers on the business’s website for longer which increases SEO and the likelihood of conversions, from your website- which means you get a bigger cut. It is also used to build brand authority. There are many different dropship services which charge depending on the product. A popular drop ship service is Oberlo because it is free to become a member and offers a myriad of products that can be added to your eCommerce store.
Dropship VS Amazon FBA
Below is a comprehensive table that details the differences between Dropship and Amazon FBA by category:
|Inventory||Limited inventory selection. Business owners have the option from choosing from thousands of products listed from various distributors, but must shop throughout distributors for specific items||Purchase your own inventory and send it to Amazon|
|Storage||No inventory storage required. Inventory is held at the wholesaler’s warehouse||Business owners must ship products to Amazon for storage|
|Shipping||No shipping required. Wholesale Distributorships product directly to the consumer||Once products are shipped to the Amazon Warehouse, Amazon ships products to consumers after the order is placed|
|Start-up Costs||Since the products are not purchased beforehand the startup costs are lower than traditional online retail stores||Because you have to buy your products beforehand, start-up costs associated with Amazon FBA tend to be higher than Dropship fees|
|Advertising and Sales||Sales are SEO and Social Media driven. The business owner is responsible for driving traffic to the website and handling all of the customer relations and sales||Products are advertised on Amazon marketplace, making it accessible to consumers worldwide. More products are sold through Amazon as they own an advertising monopoly. When creating Amazon Listings be sure to include relevant SEO strategies to boost your sales.|
|Fees||Dependant on the product, Dropship services generally charges $2-$5+ per unit depending on the size, weight, and complexity of shipping the item.||A suggested profit calculation follows:||( The amount of Traffic to your website x The number of people who buy the product) x ( Average Order Price x 5%-30% cut) = Estimated Profit||
Which Is Better For My Business Dropship Or Amazon FBA?
When deciding which business model is better for you to start by asking: How much involvement do you want to have with your business and how much profit do you expect to make?
Amazon FBA. Gears toward business owners who want to make more of a profit, but what little to do with the marketing and sales. The downside is that Amazon asks that you ship them your inventory.
Dropship. This business model is set up for owners who want more of a hands-on approach when it comes to marketing and sales. Though you do not need to hold inventory, the workload is heavier for fewer conversions. The upside is that you make more money off the products that you do sell.
Regardless of which business type you decided to go with the success of your sales are based on both Onsite and Offsite SEO. In order for your products to sell, you have to get them in front of prospective buyers. Unless you have a background in digital marketing, business owners should consider referring to a specialist as promotion is an entire business within itself.