Whether you’re still thinking about opening an ecommerce store or you’re scaling your current business, there’s a good chance you’ve explored dropshipping: the model that allows a third-party vendor to fulfill and ship your customers' purchases on behalf of your ecommerce shop. Because you don’t pay your dropshipper for the product until the customer orders it, dropshipping is a great way to test new products, expand your business, or start a shop from the ground up with minimal overhead.
FBA is a tempting option for fledgling ecommerce shops that don’t yet have the resources to fulfill every customer service promise that Amazon can.
In your research, you may have encountered Amazon’s dropshipping model, Fulfilled By Amazon or FBA. Since FBA lets you piggyback on Amazon’s brand recognition, reliable packing and fast shipping, it’s a tempting option for fledgling ecommerce shops that don’t yet have the resources to fulfill every customer service promise that Amazon can. And for many businesses it really is a great option, but it comes with a price. Literally. Between up-front costs, the cut Amazon takes and the cost of Amazon’s extremely flexible refunds and exchange policy, FBA can be expensive. So you may have decided that starting your own independent, dropshipping-based ecommerce store is the best way to go.
But how can you possibly compete with everyone’s favorite friendly behemoth when your dropshipper is across the country and has a seven-day processing time? Don’t worry; it’s possible! We’ll get into how, but first, let’s demystify FBA and highlight some differences.
Ecommerce Dropshipping Versus Amazon FBA: What’s the Difference?
Ecommerce website-based dropshipping and FBA may seem like two sides of the same coin, but there are actually some fundamental differences that make them two completely different models. First and foremost, when you’re dropshipping from your own ecommerce store, you don’t own any of the stock you’re dropshipping. Instead, your dropshipper owns the products until your customer purchases one on your website, at which point the dropshipper is notified, receives their portion of the customer’s payment, and ships the product to the customer. So, your dropshipper is either the manufacturer of the product, or they’ve purchased their products from the manufacturer in huge wholesale quantities and are storing them in a warehouse. You can still whitelabel the products and control your own brand, but the financial risk is low.
FBA requires a considerable up-front investment, in addition to the hefty cut that Amazon will be taking when your product sells.
With FBA, things work a little different. If you use FBA, you’re using Amazon’s warehouse and fulfillment/shipping services to store your products — not theirs. That means there’s more up-front money and legwork on your part to get your products to Amazon in the first place. It usually looks something like this: you’ll manufacturer or procure your own goods, and then you’ll pack them up in a big box and ship them en masse to Amazon. Amazon will then repackage and ship each product as the customer orders them. Just like with a wholesale-based ecommerce model, if your stock doesn’t move, you’ve already made the investment and you’re now responsible for it. FBA requires a considerable up-front investment, in addition to the hefty cut that Amazon will be taking when your product sells.
That said, there are some benefits to FBA that you won’t get when you’re dropshipping from your own store. FBA products are Prime-eligible, which means when a customer orders your product, they’ll get it in two days. Fast shipping aside, the other benefit to selling your products on Prime is the competitive value: people often filter their Amazon searches by Prime eligibility, which means your product will be competing against a much smaller pool than, well, all of Google. On that note, the SEO on Amazon can be a lot simpler for merchants to develop a strategy for, since it’s mostly keyword- and review-based. And finally, there’s the reliability factor: you know what you’re getting with Amazon, and so do millions of customers.
How to Differentiate Your Ecommerce Shop From Amazon
If you’ve researched the pros and cons and decided that running your own ecommerce store is a better fit for your business, let’s talk differentiation! We’ll start by making our own list of Amazon’s pros from the customer’s standpoint, so that we can talk about how to counter them.
The Pro: Amazon offers fast shipping. When the customer orders from Amazon Prime, the product shows up on their doorstep two days later.
Counter With: Excellent communication. If someone needs something in two days, they’ll probably start on Amazon no matter what. However, if they’re looking for a product they’ll love, they’re usually willing to wait. The key is to set customer expectations as early as possible and to keep them well-informed with updates. Many customers don’t mind slower shipping times, but they hate being left in the dark.
The Pro: Amazon has reliable customer service. If the customer’s product arrives at their doorstep damaged, they know that they can call or chat in to Amazon 24/7 and get their order refunded or replaced.
Counter With: Personal customer service. Look, where customer service is concerned, reliable is the bare minimum. Of course your customer service should be reliable, which means communicating your availability and responding to customer concerns in a timely and consistent way. But you have the opportunity to go beyond that. Your customers should feel like they’re speaking to a friend, one that’s sensitive to their needs and has a unique personality. When most bigger businesses have to scale up their customer service, it becomes very impersonal because they have to favor consistency and efficiency over finding the perfect customer service team. You can take advantage of that weakness and remind customers why independent businesses are so great by providing tailored, empathetic and memorable support.
When most bigger businesses have to scale up their customer service, it becomes very impersonal.
- The Pro: Brand recognition. Customers shop on Amazon because they know and love the Amazon brand. When they purchase your product, they’ll likely tell friends they “found it on Amazon” rather than referencing your brand specifically.
The biggest advantage of running your own ecommerce store is that you get to share your core values with your customers.
Counter With: Brand recognition. One of Amazon’s biggest pros is also one of its biggest cons. Similar to its customer service, the Amazon brand is reliable. People who are looking for something really unique or inspired will shy away from Amazon, where they know millions of shoppers will be eyeballing the same thing. That’s where you get to really shine, by being the authentic, unique brand of your customers’ dreams. Whether your brand is quirky, classic, trendy, brash or minimalist, the biggest advantage of running your own ecommerce store is that you get to share your core values with your customers. When someone embraces a brand, they “sign off” on those core values, and the brand becomes a little piece of their own story. That’s a profoundly cool responsibility to have as a business owner, and one you won’t get to experience using FBA, where your products become, for all intents and purposes, Amazon’s products.
The Pro: Amazon has everything. From toenail clippers to unicorn-shaped pool floats, customers can find whatever they need on Amazon.
Counter With: You have what your customer wants. There’s no denying that Amazon is convenient, and that if you need toenail clippers and don’t want to make a Walgreen’s run, they’re your best bet. But what if your customer is shopping for 40’s-inspired footwear? Or handmade jewelry? Or ethically-sourced fashion? Or wholesale craft supplies? No matter what you sell, your power lies in becoming the expert in that niche and picking out the perfect products to offer to your customers.
You aren’t just a shop owner; you’re a product curator.
We use the word “curate” a lot in the marketing world for good reason: you aren’t just a shop owner; you’re a product curator. People don’t visit the MOMA because the MOMA has everything. In fact, they visit it specifically because it doesn’t have everything. The MOMA has only the best, the most interesting, the most well-displayed, the art you really want to spend your time looking at — and it’s curated by an expert, somebody who has rigorously developed their knowledge of art history and sought out and verified the best of the best. Your ecommerce shop can be its own little museum, and your customers can come to you because they trust you as their curator.
The Bottom Line
If you decide to strike out on your own and run a dropshipping-based ecommerce store instead of using FBA, don’t be intimidated! You may have noticed a theme emerge over the course of that list we just made, and it cannot be overstated: when you run your own dropshipping store, you control your own brand. Make it the one that keeps your customers coming back.
Have any questions about dropshipping or Amazon? Ask them in the comments!