Shopify dropshipping allows entrepreneurs to start an online store without expensive upfront costs. The business model also doesn't require inventory management. Shipping and order fulfillment for all customer purchases are handled by third-party suppliers.
Amazon FBA is ideal for those who want to sell products on the Amazon Marketplace while outsourcing order fulfillment to Amazon. Sellers send their products to Amazon’s warehouses, which then handle packing and shipping, along with customer support and order returns.
Shopify Dropshipping
Shopify has more than 4.47 million daily active users and powers 4.8 million websites globally.
A Basic Shopify plan costs $19 to $25 per month.
Shopify allows store customization with over 100 themes and over 6,000 apps.
Users are responsible for driving traffic to their Shopify stores.
Typical profit margins for dropshipping range from 10% to 30%.
Amazon FBA
Amazon attracts over 310 million daily active users and over 2.7 billion monthly visits worldwide.
Amazon charges $39.99 per month for Professional sellers. Referral fees range from 8% to 15%, depending on the category.
Customization is limited to Amazon's standard listing format.
Amazon FBA requires significant investment since selles have to purchase and manage inventory.
Amazon FBA typically earn profit margins between 20% to 30%.
On Reddit, tbinishant says they've tried both FBA and dropshipping. However, they've since dropped Amazon and only use Shopify because it is “more stable.”
Meanwhile, Lance_711 emphasizes that Amazon marketplace instantly attracts traffic for FBA sellers. Shopify dropshippers, on the other hand, have to start doing business without that. “Generating that traffic is a major expense for a dropshipping store,” writes the Redditor.
Macodocious sums up that Shopify is better for branding while Amazon is for selling.
Santrel Media co-founder Mike O'Brien says Shopify is often the better, long-term choice. This is because the platform offers greater scalability and control. “If you're trying to scale a very large brand one of the best options really is Shopify,” he shares in a YouTube video. “Because you do own that standalone store.”
YouTuber Paul J. Savage prefers Amazon FBA over Shopify dropshipping. Having experienced both models, the young entrepreneur says Amazon FBA allows sellers to “make a real product.” As a result, this “increases conversion rate, which makes us more money.”
Personally, I've done both Shopify dropshipping and Amazon FBA in the past. I've created 6-figure companies with these business models, along with affiliate marketing. However, I eventually switched to a more scalable online business that generates passive income.
We show you the similarities and differences between Shopify dropshipping and Amazon FBA. We also look at the pros and cons of both options to help you decide which is best for you.
Shopify Dropshipping vs Amazon FBA: 11 Similarities and Differences
SHOPIFY DROPSHIPPING
AMAZON FBA
Store Set Up
Setting up a Shopify store will only take 30 mins to 1 hour. However, researching products and suppliers can take awhile.
No business license required to start selling on Shopify, unless you’re using the Shopify Payment gateway or are earning over $20,000 per month.
Amazon FBA (Fulfillment by Amazon) offers multiple business models, such as retail arbitrage and private label. Account approval takes up to 24 hours when you sign up under the retail arbitrage model. Meanwhile, launching a private label Amazon FBA business may take up to 6 months.
No business license is required to start.
Platform Pricing and Fees
Shopify Starter plan costs $5 per month while a Basic Shopify plan costs $19. Shopify also offers a free 3-day trial period.
When creating your website, you will need to spend on domain registration (around $12) and web hosting costs (around $3 per month).
Amazon has two seller plans namely Individual and Professional. For Individual, Amazon charges you $0.99 per item sold. Most FBA sellers go with Professional, which costs $39.99 per month.
Referral fees cost 8% to 20% for most items. Fulfillment fees are based on product type, size and weight. Monthly inventory storage fee is based on product size.
Control Over Digital Experience
Shopify offers a variety of free and paid themes. It’s fairly simple to set up and customize a Shopify store by using their page builder. The experience is similar to making a WordPress website.
Amazon allows FBA sellers to create product listings on the Amazon Marketplace. You can add your own copy and product images. However, you can’t customize your product listing.
Joining the Amazon Brand Registry allows sellers with enhanced capabilities to showcase their brand. Users get Amazon A+ Content and Amazon Storefront.
Initial Investment and Inventory
No need to invest on inventory to start with Shopify droshipping. You'll only pay for products after customers place their orders. Your chosen third-party supplier manages inventory and order fulfillment on your behalf.
According to Seller Snap, Amazon FBA sellers invest $2,500 to $5,000 on average. You will need to purchase products in bulk and ship them to an Amazon warehouse. From there, the service handles the order fulfillment process for your business.
Product Sourcing
Shopify dropshippers usually source products from international third party suppliers. This includes AliExpress, CJDropshipping, SaleHoo, Sprocket, and others.
Amazon FBA usually buy products straight from manufacturers. They purchase in bulk and then forward the products to Amazon’s fulfillment center.
Payment Options
Aside from Shopify Payments, Shopify integrates with over 100 payment gateway options globally.
Amazon uses Amazon Pay and accepts payments from most major debit and credit cards.
Average Earnings Per Month
Shopify stores generally earn $1,000 to $2,000 per month. Top earners make as much as $100,000 or more per month.
An Amazon seller can typically earn $1,000 in monthly sales. Meanwhile, top sellers can earn over $100,000 in monthly sales.
Timetable for Profitability
With Shopify dropshipping, you’ll have to test different products and master marketing. Dropshippers can expect to spend 6 to 12 months running their business before it makes a profit. Once you find a profitable product opportunity, expect a profit margin of 15% and 20%.
Most FBA sellers start making profits within 6 to 12 months. However, relying on 1 or 2 products can be risky. Experts recommend that sellers continue reinvesting money back into the business until they have 4 to 5 products that generate stable revenue.
Scalability
Scaling a dropshipping store can be a challenge because of the nature of the business model. You rely on your suppliers’ pricing and can’t push down product costs by purchasing in bulk. However, it’s still very possible if you can find good suppliers and trending products to sell. You may eventually have to hire a team to handle customer support. This will allow you to focus on higher-level operations needed for scaling.
With Amazon wholesale or private label, your business has minimal limits. As your business grows, you can push down product costs by buying in higher quantities. Since Amazon handles order fulfillment and customer support, you can focus on other aspects of your FBA business.
Marketing
Dropshippers mainly use Google Ads and/or Facebook Ads. On average, dropshippers spend $0.94 per click or $12.07 per 1,000 impressions on Facebook Ads. Cost per lead is at around $5.83. Webinopoly recommends a starting budget of $2,000 to $3,000 to gain traction.
Amazon FBA sellers advertise directly through the Amazon marketplace. According to JungleScout, Amazon PPC costs $0.05 to $10+, depending on the category of your product.
Amazon private label sellers usually need at least $6,000 to $10,000 of startup capital available.
Success Rate
Dropshipping success rate is between 10% to 20%, according to Shopify.
Amazon FBA success rate is between 1% to 27%, according to TrueProfit.
Shopify Dropshipping Pros & Cons
Starting your Shopify store only requires $5 for a Starter plan or $19 for a Basic plan. New users only pay $1 for the first month for Basic to Advanced plans. You can save further by up to 75% by paying yearly.
All paid Shopify users can access 24/7 tech support via email and live chat.
One advantage of the dropshipping business model is you don’t have to buy and manage inventory. You pass customer orders to your third-party suppliers. They then handle the order fulfillment process on your behalf.
You can enjoy the flexibility of testing multiple products without investing any money.
You can boost your earnings as you find trending products in unsaturated niches.
Dropshippers earn only around 10% to 20% profit from every sale. This can lead to small monthly profits, unless you manage to find and sell a trending product.
As a Shopify dropshipper, you are constantly spending on paid advertising. You'll also need to shoulder transaction fees for PayPal or bank transfer payments. These expenses can cut into your potential earnings.
Ecommerce expert Austin Rabin has a YouTube video called “How To Start Dropshipping By Copying Successful Brands.” According to him, it can be really easy to duplicate any existing dropshipping brand online.
“It's good to take brands for inspiration and put your own spin and twist on it,” he says. That said, anyone can easily copy what you’re doing. So it won’t take long until your winning product becomes a trend and everyone starts selling them.
A common issue among Shopify drop shippers is the lack of control in supply chain and shipping turnover. For example, working with a supplier based in China can lead to such problems. It can then result in negative customer reviews and loss of potential sales.
With over 4.4 million live sellers in 175 countries, competition can be fierce on the Shopify platform. The low barrier to entry often means the number of sellers will continue to increase each year. You really have to do constant research and jump into trends to stay ahead of your competitors.
As a user of the platform, you are directly subject to Shopify’s cost changes, outages, and updates.
Amazon FBA Pros & Cons
Amazon shoppers love the platform for fast and affordable shipping. Moreover, some FBA products are even available for free shipping. This can lead to better customer satisfaction experience and more sales.
Amazon provides a strong support system for FBA sellers. They handle important aspects of customer service, including returns and refunds.
Amazon FBA business owners can win the Amazon Featured Offer. This is the box section on the right side of the product page with the "Add to Cart" and "Buy Now" buttons. This can boost your sales because 90% of Amazon purchases are “made from the (Featured Offer),” according to Gitnux.
According to Yaguara, experts anticipate that Amazon Prime membership will reach up to 176.2 million by 2025. Meanwhile, Statista reports that most Prime members “spend an average of $1,400” per year. This is bigger compared with the $600 annual spend of non-Prime members.
Since Amazon handles order fulfillment for FBA sellers, you’ll have to pay them certain fees. Referral fees usually cost 8% to 20% per product for each transaction. Meanwhile, storage costs can set you back $0.56 to $2.40 per cubic foot each month. This can even cost you higher, depending on the total space your inventory occupies.
According to EntreSource, 22% of Amazon sellers have experienced account suspension at least once. Meanwhile, Riverbend Consulting co-founder Lesley Hensell writes in a Forbes article that the platform’s priority “is not, never has been and never will be sellers or brands.”
“Every seller and brand is replaceable,” adds Lesley. “Buyers are paramount, and their complaints rule the day.”
On Quora, user Bluntsnd40s shares that mislabeling and misallocating can happen. When it does, “there is almost no way to resolve it quickly.” According to the Redditor, they ended up “losing 2 months worth of sales on 3 of my top SKUs” because of the experience.
Amazon has a no-questions-asked, 30-day return policy for most products. This can be a hassle for sellers to deal with. According to AwesomeDynamic, Amazon has a return rate of 5% to 14%, depending on the category. Meanwhile, apparel, electronics, and jewelry have a high return rate of up to 40%.
Is Shopify Dropshipping Worth It?
Shopify dropshipping is worth it for online entrepreneurs looking for a low-risk business model. Shopify stores usually earn $1,000 to $2,000 per month. Take note, however, that competition can be a real challenge. In fact, it can affect your potential earnings.
Ecommerce expert Cameron Howard did a dropshipping challenge on YouTube. He set a $250 budget limit and built a dropshipping business from scratch. He decided to see how much he will earn in 5 days. After doing research on TikTok, Cameron eventually found a $14.91 skin care water filter in AliExpress. He later sold it on his new website for $59.99. Within the set timeframe, he was able to generate $479 of sales from selling 8 units. He also spent a total of $225 in paid ads and made a total profit of $126.
“I know this isn't too much money but it goes to show you that anyone can come in as a beginner and start a profitable online business without too much experience,” Cameron sums up.
Is Amazon FBA Profitable?
Amazon FBA is profitable for business owners who know how to build their brand and sell online. According to JungleScout, new Amazon sellers earn an average profit of almost $30,000 per year. However, it requires a huge startup cost before one can launch an Amazon FBA store.
YouTuber and 7-figure Amazon seller Travis Marziani interviewed Taylor - a former nurse who decided to start an Amazon FBA business. After using Helium 10 software for research, Taylor began selling his own cat tracking collars. In 3 months time, he was able to generate a revenue of $19,080.33 and a total profit of $1,891.17.
Sales are on an upward trend but he admits he also made mistakes along the way. For example, launching his products with 3 color variations was not a good idea as an Amazon FBA newbie. “I had to order a lot of products off the bat,” reflects Taylor. “My minimum order quantities were so high that I ended up having so much inventory that I was paying to have Amazon store that inventory for me.” Travis adds it’s best to “start out with something simple and test the market.” According to him, having 3 different variants is like “having 3 different businesses" on Amazon FBA.
Why Local Lead Generation is a Better Idea Than Shopify Dropshipping and Amazon FBA
Local lead generation is a better idea than Shopify dropshipping and Amazon FBA because you are not reliant on their platforms. When selling via Shopify and Amazon, you have to comply with their regulations and pay the required fees. They may also suspend your account if you violate their policies and rules.
Shopify dropshipping and Amazon FBA both have their advantages and disadvantages. If you’re just getting into online business and have a low budget, Shopify dropshipping can be ideal for you. Amazon FBA can be an option if you have more capital to risk. It allows you to work with a manufacturer to create and sell your products.
That said, local lead generation is a superior business model. You are not a middleman selling a supplier’s product on Shopify. You also don't have to spend big bucks to start on Amazon FBA.
With lead gen, you only need a minimal investment to build a business website. Your next step is to rank it on major search engines, and then offer it for rent to small business owners. You are not dealing with numerous customer inquiries each day. Instead, you are working directly with local entrepreneurs. As you provide leads for their businesses, they will happily pay for your services each month.
I’ve done both Shopify dropshipping and Amazon FBA in the past but in all honesty, lead generation is just way more profitable. Case in point, I make $2,000 per month from a tree care website that just took me 15 hours to build and rank. Plus, I only spent $500 as overhead costs for that. Since I own multiple sites now, I earn up to $52,000 per month.
We also have a lead gen coaching program where we've taught over 7,000 students and counting. Our repeatable 3-step process can help you earn stable income without having to sell products online.
