Transcribe of “Amazon FBA Versus Dropshipping – What They Don’t Tell You”

Hi guys, welcome to the “Make Money Online “with Drop Shipping” YouTube channel, with me Neil Waterhouse. This week’s video is Amazon FBA versus drop shipping. But before I get started, make sure you subscribe and turn on the notifications to my channel because I post videos just like this showing you how to make money online with drop shipping every week and you don’t want to miss them. Now let’s launch straight into it.

Pros and cons to Amazon FBA and drop shipping

First of all, like everything in life, there are pros and cons to Amazon FBA and drop shipping. Amazon FBA has pros and cons and also drop shipping has pros and cons. There’s not a one-fits-all strategy that suits every personality and everybody’s resources. And as I’ll show you it all comes down to personal preferences and whether or not you’re willing to outlay money on products before they’ve sold.

Amazon FBA and drop shipping, is they are both COVID-compatible

Now the big advantage of both businesses, Amazon FBA and drop shipping, is they are both COVID-compatible, meaning they can be both be fully automated to make money 24/7/365, without you ever needing to leave your house. At the end of this video blog after you choose whether Amazon FBA or drop shipping suits you best, I’ll also give you two links to two separate, complete, entire, free, online step-by-step courses, with video recorded case studies from average people who have built their businesses from scratch to six and seven digits.

How to build a seven-digit Amazon FBA business step-by-step

The one course is teaching how to build a seven-digit Amazon FBA business step-by-step, and the other teaching how to build a seven-digit drop ship business from scratch using less than a hundred dollars. And again, these are complete courses for free. So let’s get started. Let’s first look at the main pros and cons of Amazon FBA. First of all, if any Amazon newbie is watching this video, Amazon FBA stands for Fulfillment By Amazon.

Amazon fulfills your orders to your customers

So in other words, Amazon fulfills your orders to your customers. When you sell on Amazon FBA you first must send your products to an Amazon warehouse, and then Amazon warehouses your products, and every time an item sells, Amazon picks, packs and ships the products to your customers. Amazon will also handle customer support for you. Happy days. Now the downside of this Amazon FBA strategy is you need to spend your money first purchasing inventory, whereas with drop shipping your customers pay you first before you purchase products.

Many people underestimate how much they need to invest in stock

With Amazon FBA, many people underestimate how much they need to invest in stock to make a decent living using the Amazon FBA strategy. As a fan and host of the four largest eBay, Amazon meetup groups in Australia, I get to see inside, not just our own FBA businesses and our drop ship business, but I also get to see inside many the businesses of the members of the groups. On average, as a rule of thumb most people need to invest around a $36,000 on inventory to make on average $1,000 profit. So again, just to repeat that, $36,000 on inventory to make on average $1,000 profit per week, after all expenses.

General rule of thumb based on averages

Now, of course, this is a general rule of thumb based on averages. There are of course exceptions where people have an item with absolutely no competition, and it sells like hotcakes. And over the last 20 years, we’ve had these too however, with most businesses the 80-20 rule comes into play. That is 80% of most business’s revenue comes from only 20% of their products. It’s not realistic to quote figures from a top 20% of a business’s products.

We must look at the average

We must look at the average. Another problem with Amazon FBA is there’s always a chance of items not selling. Sometimes you can do product research and find an item which makes good profit and sells like hotcakes, however, by the time you order it from your supplier and it arrives in the Amazon FBA warehouse, there can be many other new competitors. And if it’s a really hot item, Amazon may also decide to sell the item themselves, as we’ll see, you now have to compete with Amazon.

The big pro we drop shipping is you get paid first before you need to purchase any products

In regards to drop shipping, the big pro we drop shipping is you get paid first before you need to purchase any products. Which means you can build a six and seven-digit drop ship business using less than $100. One downside of drop shipping that gets banded around a lot, is that drop shipping on average has lower profit margins. However, this statement misses the big picture. It’s not about which strategy makes the highest margins, it’s all about which strategy can make the business owner the most money.

Some items on Amazon FBA sell for higher margins than drop shipping

Yes, some items on Amazon FBA sell for higher margins than drop shipping, but there’s also a lot of items that sell for lower margins, and many FBA items don’t sell at all. There are a lot of Amazon FBA sellers all over the world, who are paying for long-term Amazon storage fees. And also a lot of people all over the world with a lot of inventory that did not sell sitting in their garage.

All that money tied up in inventory that is sitting there not selling is a lost opportunity cost

All that money tied up in inventory that is sitting there not selling is a lost opportunity cost, where the money could be doing something better, like paying off the house. Now don’t get me wrong, I’ve been importing for over 30 years and selling online for over 20 years. And importing and selling on FBA is it’s been good to us but if you’re a beginner, you must be very careful. Now the big advantage here with drop shipping is you only purchase products after the item sell.

You’re always cashflow positive

So you’re always cashflow positive. In other words, you make a profit before you need to purchase any inventory. Now here’s the big piece of the puzzle that gets left out, with Amazon FBA your business is limited by the amount of money you can or you’re willing to spend on inventory. And this is not the case with drop shipping. Let’s say you’re willing to spend say $10,000 in inventory to send to Amazon FBA. And that $10,000 comprise of say five different products, multiples of the five different products.

Your FBA business is now limited to only five products

Your FBA business is now limited to only five products. And your monthly sales are limited to just these five products. With drop shipping the sale of your business is not limited, as you can just keep listing more and more products, as you don’t need to pay for the products until they sell. You can list 10 products, 100 products, or literally thousands of products, and you can do this for 37 different countries. Yes, you might have low margins with drop shipping, however, you have literally hundreds or thousands more products listed. As the old saying goes, “Many streams make a river.”

Amazon does all the shipping for you

Now one big attraction with Amazon FBA is that Amazon does all the shipping for you. However, with drop shipping your suppliers also do all the shipping for you. As your business grows, your suppliers do all the hard work for you. But unlike Amazon FBA, with drop shipping, you need to look after all your own customer service. However, you don’t need to do your customer service yourself. You can use low-cost outsource virtual assistants from one-to-one hour, to not just automate your customer service and do your customer service for you, but also automate all other aspects of the business including product research, listing products, et cetera. The whole reason most people build online businesses, myself included, it’s for lifestyle.

Business makes money by itself

So the business makes money by itself, 24/7/365 without you. Like I’ve mentioned many times before, you can implement low-cost overseas virtual assistance, they can source from $1 per hour. And again, I’ll put another free link on the screen and below where you can get virtual assistance from $1 per hour. Also with drop shipping you must have a strategy in place to continually check to make sure your suppliers have inventory available, as you don’t want to sell items and then find out your suppliers got none in stock.

Inventory checking can be fully automated

But again this inventory checking can be fully automated. Again, I’ll put a link on the screen and below to another free guide showing how you can do this. Bottom line, with both an Amazon FBA business and a drop ship business, they both can be fully automated using software and low-cost overseas virtual assistants who can do the tasks that cannot be automated with software. Personally, for people who are new to making money online,

I believe drop shipping is a great way to get into making money online

I believe drop shipping is a great way to get into making money online. And then if you wish to start importing as well start importing your top-selling drop ship items. And also if you do start importing your top-selling drop ship items, send those top-selling drop ship items to Amazon FBA. That brings us to the end of this week’s video blog. Make sure you give it a like if you think it was helpful, and write down in the comments what part you thought was best.

You’re not going to want to miss any of my upcoming make money online

And also don’t forget to subscribe to this channel and turn on the notifications because you’re not going to want to miss any of my upcoming make money online with drop shipping videos. And as I promised, you can get the step-by-step guides completely for free, showing how to build a seven-digit drop ship business step-by-step from scratch using less than $100, and another separate complete course for free showing how to build a seven-digit Amazon FBA business step-by-step, and also another guide showing step-by-step how to find overseas virtual assistants from $1 an hour. So all you have to do is tap the links down below in the description to download them. Thanks for watching, and I’ll see you on the next video.

Amazon FBA Versus Dropshipping – What They Don’t Tell You