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eBay Dropshipping vs Amazon FBA | Which is better if you’re new to Ecommerce?

January 23, 2023

According to The Drip, Ecommerce sales are expected to account for 21.8% of all retail sales globally by 2024. Considering the fact that Ecommerce was just 13.6% of sales just a few years ago in 2019, it’s clear Ecommerce is on a fast growing trajectory. When weighing the options for getting started in Ecommerce, eBay dropshipping vs Amazon FBA is one of the most common considerations. Unlike local lead generation, Ecommerce is already very saturated, but both eBay dropshipping and Amazon FBA offer sellers who are able to carve out a piece of the pie a relatively hassle-free order fulfillment process. Dropshipping on eBay involves having the supplier of your products fulfill customer orders for you, while Amazon FBA sellers outsource order fulfillment to Amazon instead. We explore the pros and cons of each business model below and highlight the best option if you're just getting started

What is dropshipping on eBay?

eBay is a highly trafficked Ecommerce marketplace

According to eDesk, over 109 million online shoppers visit the eBay marketplace every month. Anyone can signup to be an eBay seller and sell new or used products on the platform to customers all over the globe.

The dropshipping business model is low-risk

Dropshipping is a popular Ecommerce business model where you have your supplier send the products directly to your customer. The business model is practically risk free because you don’t purchase any products until after you make the sale. Then and only then do you go to your dropshipping supplier to actually purchase the product from them and provide them with your customer’s address to send the product. Dropshipping works because most online customers stick to shopping on places they know and feel comfortable with like Amazon and eBay, while dropshippers dig deeper to find products to sell at a discount on supplier marketplaces like AliExpress

What is Amazon FBA?

Amazon is the #1 online marketplace

Amazon is the most popular Ecommerce marketplace in the world. Shoppers flock to the site for competitively priced products that are delivered to their doorstep in just a few days because of Amazon’s advanced logistics systems.

Take advantage of Amazon's advanced logistics with FBA

Fulfilled by Amazon, or Amazon FBA for short, is a business model where you outsource the order fulfillment and customer service aspects of your business to Amazon. To participate in Amazon FBA, third party sellers send their product inventory into one of Amazon’s many fulfillment centers. Amazon stores your products until sold, and then promptly sends them to your shared customers. If there are any customer complaints or refunds that need to be handled, Amazon takes care of it on your behalf. 

What it means to sell through an Ecommerce marketplace 

There are two options for selling Ecommerce products. You can either have your own online store or sell your products through an established Ecommerce marketplace. The benefit of selling through a marketplace is that the traffic they attract has high purchase intent, and both eBay and Amazon are marketplaces with massive customer bases. Another advantage is that you don’t have to spend resources on setting up an online store like you do with Shopify. Selling on either of these marketplaces enables you to create a business that you can run from anywhere and work on your own schedule. 

Although selling through an Ecommerce marketplace has its advantages, there are also drawbacks. When you sell through a marketplace, you have to abide by someone else’s rules for how to run your store, and it's difficult to differentiate yourself from other sellers on the platform. While the potential buyers pool on these platforms is huge in the hundreds of millions, there are billions of internet users out there you won’t be able to reach. You’re limited to the customers on your chosen platform. Finally, competition is extremely high, as there are millions of sellers on both marketplaces.

Alternative Online Business Model: Local Lead Generation

Let’s take a moment to explore another online business model, local lead generation. Local lead generation is creating high-value traffic for small businesses and selling them the traffic for hundreds to thousands of dollars each month, with very little maintenance on your end once its setup. You can start a local lead generation business and make insane profits because you offer businesses a real service they want and need. Unlike Ecommerce, the market for local lead generation is relatively untapped, so you won’t have to compete with millions of other people trying to do the same thing. Considering that there are over 32 million small businesses in the United States alone, your potential customer base is HUGE with this business model. If you’re having trouble generating profits with Ecommerce, local lead generation may be worth a look.

Pros of dropshipping on eBay

Get started with low-risk

Drop shipping on eBay is one of the most low-risk Ecommerce business models out there because you don’t have to spend any money until after you’ve made a sale. If you want to advertise on the eBay platform with Promoted Listings, you don’t pay for each click like you normally would for paid ads, but instead only pay a pre-specified percentage of the final sale. You don't even have to purchase a monthly subscription like you normally do on Amazon or Shopify. In terms of low-risk online business models, it doesn’t get much better than being an eBay dropshipper.

Fewer things to worry about

As an eBay dropshipper, you’re selling someone else’s product on a marketplace with an established customer base. Your primary responsibilities consist of finding products where most people aren’t looking and using eBay to attract customers to purchase the product so you can realize a profit on the sale. You can’t do any branding for the product and shipping is in your supplier’s hands, so you can limit your focus to just a few things with this business model.

Reasonable fees

In exchange for providing you a place to list your products and access to customers, fees for dropshipping on eBay are quite reasonable. eBay just takes 12.5% to 15% of the final sale of your product in most cases. If you’re listing over 50 products in a month and don’t have an eBay store subscription, you’ll also have to pay an insertion fee for each product you list as well. However, you can avoid the insertion fee by paying a monthly eBay store subscription, which allows you more free listings. eBay store subscriptions start at $4.95/month for the Starter plan.

Experiment and sell more products

As a dropshipper, you don’t have to commit to a few products like you do when buying products in bulk. Instead, you can test out different products on eBay to see which do best. This also allows you to sell a greater variation of products and diversify your sales so that you aren’t reliant on just a few products to generate revenue. 

Avoid spending resources on branding

Although establishing an Ecommerce brand certainly has its benefits, it also requires you to spend time and money. Creating a product logo, unique packaging, and other branding materials around an Ecommerce business isn’t cheap. By using the dropshipping business model, you don’t have to worry about expending resources on branding.

eBay dropshippers can use an auction

One of the defining features of selling on eBay is that you can sell your items under an auction. Although you can still use a fixed price model, selling products under an auction can let you earn more than you expected. It can also give you a better understanding of what price point people actually value the product at.

Cons of dropshipping on eBay

Expect a lower profit margin

When you dropship, you buy just one unit of a product at a time. Other online business models like wholesale or private label where you buy a large quantity of a single product in bulk allow you to drive down the per unit cost, which is impossible when dropshipping. Therefore, profit margins with dropshipping are generally slim. BeProfit highlights the average dropshipping profit margin at 15% to 20%.

Limited product information to reference

When you use eBay for your dropshiping business, customers may reach out to you requesting additional information on the product. However, dropshipping suppliers are notorious for not providing detailed product information that you can refer to. Therefore, you may find it difficult to answer all the questions interested customers have about your products.

Difficulty building a long-term business

Dropshipping on eBay does not allow you to create any of your own brand loyalty usually needed for long-term Ecommerce success. Even if you find a good product opportunity that makes you money today, someone else can easily see your success and start selling the same product on eBay and take your sales. eBay dropshipping is an endless cycle of finding new product opportunities.

Slow delivery times create unhappy customers

In this day and age, online customers expect to receive their products fast. However, it's common to source dropshipping products for cheap from far-away countries like China, India, or Vietnam. It can be difficult to find suppliers that can affordably get their products to your customers’ doorstep in a reasonable amount of time. If delivery times are too slow, customers will be unhappy and leave negative reviews on your eBay seller account.

No quality control

Dropshipping products go straight from the supplier to the customer, so there’s no quality control when products break in transit or a supplier sends poorly manufactured products to your customer. 

Lack of promotional deals

Your margins are already slim as a dropshipper, so it’s not really feasible to offer promotional deals on your products. Ecommerce stores that sell multiple products in the same niche can package their products together to offer “bundles” and give a better deal for buying two products. As a dropshipper, you have some ability to offer bundles if you’re selling multiple products from the same supplier, but offering a discount on the bundle just cuts into your profit margin on each product. 

Customer contact required

When you dropship on eBay, it’s not uncommon to receive customer inquiries. Whereas Amazon handles this for you in their FBA program. You’ll have to spend time responding to customers yourself as an eBay dropshipper. 

Pros of Amazon FBA

Amazon is the go-to search engine for online shopping

Amazon draws 197 million online shoppers to its platform each month, according to Big Commerce. Amazon is so ingrained in people’s lives that it’s often used as a search engine for buying products, with 82% of online shoppers using it to check prices. An Amazon seller has the potential to get their products in front of an enormous audience with high-intent to purchase because Amazon has established trust among customers, so they continue returning. 

High-value Amazon Prime members

Not only does Amazon attract a substantial amount of traffic, but many of their customers spend big. There are over 200 million Amazon Prime members worldwide spending nearly $2000/year on Amazon. By selling under the Amazon FBA program, you entice those high-value Amazon Prime members to purchase your products and receive free two day shipping.

More time to focus on scaling

Outsourcing much of the typical Ecommerce work to Amazon leaves you more time to focus on things that scale your business like product research, advertising, and branding.

Amazon takes responsibility for FBA products

Once you send your product inventory to Amazon, it’s their responsibility not to lose or damage it, or else they’re liable for it. According to Amazon’s FBA inventory reimbursement policy, Amazon will replace the item or reimburse you a fair value dollar amount for it. 

Improved profit potential 

An Amazon marketplace seller has many options in terms of business models to employ. You can use models with less capital requirement and less profit margin like retail arbitrage, or you can use business models that have greater capital requirements but allow for greater profit margins like wholesale or private label. With wholesale or private label, you buy products in bulk to lower your per unit cost and increase your profit margin on each item sold. 

Building a valuable asset

Amazon businesses are becoming extremely valuable. Besides the profit you can potentially make while selling on Amazon, if you establish a branded Amazon store, you can expect to net anywhere from 4x to 8x your yearly take home profit if you sell your business, according to Marketplace Pulse. An Amazon FBA business isn’t just a way to make some money, it’s investing in a potentially lucrative long-term investment.

Cons of Amazon FBA

High FBA fees

Amazon handles a lot for you when you sell through their FBA program, so it’s not surprising that FBA fees can be costly. Common Amazon FBA-related fees include:

  • Monthly seller subscription - Most Amazon sellers elect for the $39.99 monthly seller subscription, but you can also use the individual seller plan that charges $0.99 per item sold instead if you sell low-volume. 
  • Referral fees - Amazon charges a percentage fee on your selling price for letting you list and sell your products on their platform of 8% to 17%, depending on the product category. 
  • Fulfillment fees - Amazon assesses fees for sending your products to your customers based on the weight, dimensions, and type of product. Shipping large objects through Amazon can be expensive. 
  • Storage fees - Storage fees are based on the dimensions of your product and the season. They charge a higher rate in the high season around the holidays. Also, if products stay in the Amazon warehouse longer than 270 days, they incur a more expensive Amazon fee. 

Expensive advertising costs

Besides a laundry list of fees, Amazon advertising is another expense you need to consider when selling through FBA. Amazon PPC is advertising on the Amazon marketplace where you pay each time someone clicks on your product advertisement. According to JungleScout, Amazon PPC clicks cost anywhere from $0.05 to $10, depending on how competitive the keyword is that you’re targeting in the campaign. If you don’t optimize your Amazon listing well enough, you may get many clicks on your advertisement but little sales.

Increased returns

Amazon is a customer-centric company, so their operational policies are geared towards keeping Amazon customers happy. As an FBA seller, your business is obligated to accept product returns for up to 30 days. It’s also not unheard of for Amazon to accept returns past the 30 day mark in order to keep customers satisfied. Expect more product returns for your business as an FBA seller.

Product preparation requirements

If you want to participate in the Amazon FBA program without incurring unexpected fees, it’s important to properly prepare your products for Amazons warehouse. Because customers expect a certain standard when ordering through the Amazon platform, Amazon has strict packaging and prep requirements. If you don’t follow Amazon’s guidelines, Amazon will fix the packaging for you and charge you a fee for the service, or they may not even accept your products at all.

High capital requirement

As mentioned, there are multiple business models you can use when selling on Amazon FBA. Some of the most popular and achievable Amazon FBA business models require extensive capital in the ballpark of $6,000 to $10,000 minimum to get started. You need to consider costs like ordering products in bulk, international shipping if sourcing outside your home country, branding with logo and package design if selling under private label, copywriting and Amazon SEO help to properly set up your product listing, and a large advertising budget to get customers to see your products and make sales. 

Restock limits

Amazon limits the number of products you can send into their fulfillment centers based on your past sales performance and future forecasted sales. There are many people trying to become successful sellers on Amazon, but Amazon only has limited space to store products, which is why they limit how much you can send them based on how well your products sell. These Amazon restock limits force some sellers to work with third-party service companies to store their Amazon products temporarily.

Which business model is better if you’re just getting started?

Dropshipping on eBay is the better option if you’re just getting started because it’s a low-risk way to learn some basic Ecommerce skills while making a bit of money. However, you can also do Amazon dropshipping. When dropshipping on Amazon, instead of using FBA to have Amazon do order fulfillment for you, you use Amazon FBM, or fulfilled by merchant. (Decide which is best for you with our full Amazon FBA vs FBM guide.)Once you learn the ropes of dropshipping on either platform and save up some capital in your Ecommerce business, you can move onto a more long-term Ecommerce business model like private label.

Conclusion

Although it has low entry barriers, establishing a successful Ecommerce business is difficult because of how saturated the market has become. Both eBay dropshipping and Amazon FBA make selling Ecommerce easier by outsourcing shipping to a third-party so you can direct more of your focus on what’s really important: finding high-quality products that actually provide value in your customers’ lives. Whether you choose either of these business models or one of the many other online business models out there, it’s essential to keep a clear goal in mind and not give up until you accomplish your pursuits.

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  1. Amazon has the larger customer base, and the ease of making the sale on Amazon is easier. Lately my Ebay sales has been low, but Amazon has been steady. I would take Amazon FBA over ebay dropshipping any day of the week.

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