Order fulfillment is an essential part of this gigantic world of eCommerce. It is a process that deals with order receiving, packaging, shipping, and the delivery of goods. It also looks after the exchange and returns process. In the current scenario, most brands and sellers opt for FBA or dropshipping for fulfillment. FBA stands for fulfillment by Amazon, and it’s a renowned service that Amazon gives to sellers to sell their products on this enormous eCommerce platform. In this particular process, Amazon looks after every order fulfillment step for you. On the other hand dropshipping is a fulfillment process that is single-handedly managed by the sellers without the involvement of any third party. If you are going to sell products on an eCommerce platform, you definitely have to choose one. Both are methods of order fulfillment, and they have their advantages and disadvantages.
However, we will clear all your doubts regarding Amazon FBA and dropshipping in this blog. It will help you better understand the difference between the two and choose one according to your preference. Here, we will learn more about both models and understand their pros and cons.
A Brief Description of Amazon FBA
Amazon FBA provides an excellent opportunity for beginners who want to target customers on a vast level. It is a renowned business model globally in trend for its phenomenal scalability. Of course, you are aware of the enormous reach of Amazon from rural to urban areas of the country. It’s a spectacular eCommerce platform where one can list their signature products and sell them online. The order fulfillment service provided by Amazon can minimize the risk of order failure. Through the Amazon FBA, your product will reach the Amazon warehouse, and then they will process the order further. They will look after the picking, packaging, and shipping part of this process. Sellers need to pay a certain amount of FBA to Amazon. Nowadays, most sellers who deal in bulk orders opt for this peculiar business model. This process also includes customer service along with the return reconciliation. You can also use the Amazon brand analytics tool to sell your products efficiently on Amazon.
Advantages of Amazon FBA
Effortless Order Processing: Since Amazon looks after the picking, packing, and shipping part, you need not add extra effort to the whole order processing. This giant eCommerce king handles all the essential steps of order fulfillment. You can utilize this time to focus on another crucial part of your business.
Brand Recognition: Establishing a brand in the eCommerce industry is time-consuming. No one makes their brand overnight, but with the FBA service, you can sell your products under the brand name of Amazon. It saves your time and money from spending on branding. The goodwill of this brand automatically provides brand recognition for your products.
Upsurge the Reach of Target Customers: It is essential to have a solid customer base for a successful eCommerce business. However, Amazon FBA allows you to reach out to target customers. It can help you in generating more and more revenue.
Disadvantages of Amazon FBA
Inaccuracy in Inventory: Regrettably, while taking Amazon FBA service, you won’t be able to keep track of inventory. The unsold products may get accumulated at the warehouse, and it may increase to the point where it can become impossible to manage the inventory appropriately. However, you can use the Amazon brand analytics tool to eliminate this. It will keep an eye on your inventory without any hurdles.
Higher Competition Risk: Unfortunately, you are not alone in the Jungle of the eCommerce market who are using the FBA service. So you can not solely take advantage of this service. Many other brands out there are selling the same product as yours. So for beginners, it can be challenging to compete with experienced brands and sellers.
Extra Charges for Long-Term Storage: Taking the service of fulfillment by Amazon can cost you an extra penny. You have to pay them extra for the long-term storage of your products. You need to pay them in case your product doesn’t sell out.
A Brief Description of Dropshipping
In the eCommerce industry, dropshipping is one of the trending business models that seem beneficial and cost-effective for sellers and brands. In this process, you need to purchase the products from any third-party vendors and directly ship them to the customer’s address. Some sellers keep the products at their houses or in self-made warehouses, and then they directly ship the order to customers. You don’t need to manage any inventory or buy products in bulk in this process. Hence, there are bulk products, which ultimately minimize the risk of loss. Dropshipping could be the latest trend in India, but countries like Australia, Canada, and California have been into this for a long time now. This process is much more convenient because it doesn’t require a vast investment. If you are new to this online business and don’t want to take any risk, you can go for it. In this regard, to make this process more efficient and profitable, you can take the help of a seller analytics tool. However, this process also has some pros and cons.
Advantages of Dropshipping
Minimal Investment: It is one of the most tenacious advantages of drop shipping in that it doesn’t require a hefty investment. You don’t need to create a concrete foundation to start your eCommerce business. This process is budget-friendly, and you can initially get aboard. However, adding a seller’s analytic tool can make it easier to establish your business in the first place as it can minimize the risk of failure by providing you the real-time data on order fulfillment.
Minimum Risk: There is a minimum risk of business failure in dropshipping. You don’t need to manage a massive inventory. If you have any, you will be solely responsible for managing that, which minimizes the risk of money loss or failure. You can save more money and invest it in adding more value to your business.
Location Friendly: It is another fantastic benefit of dropshipping; this business model doesn’t require you to be at a precise location. You can efficiently operate your online business by keeping in touch with vendors and customers.
Disadvantages of Dropshipping
Lesser Profit: However, this process doesn’t require a considerable investment, but the return on investment rate is comparatively less. Also, the competition is very high, and you have to keep in mind that you are not the only one selling those products. Out of the blue, you can’t raise the price of your products because customers can find the same product at a lesser price. In this way, dropshipping can affect the revenue of your business.
Clumsy Customer Support: In this business model, you have to provide customer support from your end. Believe it or not but it can be a clumsy process. You can not provide excellent customer support to your valued customers because you may not always be available to answer their questions. Moreover, if you are buying products from a supplier and then selling it, you won’t be able to gather all the precise information regarding that product. Thus, it can hurt your customer’s sentiments.
Lack of Branding: In the dropshipping process, you won’t be able to do a strong branding of your product. To sustain the eCommerce business, branding is a necessity of this era. It will be pointless to sell your products without any branding. In this business model, the lack of branding may always remain there.
So, now you have a clear picture of Amazon FBA and dropshipping. Both business models are working parallelly, and people are into both. But then again, the real question is you can’t go with the flow if you are planning to sell products online; you have to opt for one of the above models. We have already mentioned the advantages and disadvantages of both business models. You just need to choose one as per your preference.