E-commerce has been one of the fastest-growing areas in recent years. Many enterprising people think of starting their own online business. There are many models of organization, but two of them are considered the most effective at the moment. They are Amazon FBA and dropshipping. How to choose the one that is right for you, read below.
The abbreviation FBA stands for Fulfillment by Amazon. It is a special program that the tech giant offers to manufacturers and sellers. By participating in it, you can place your products on the company’s website and app. At the same time, Amazon takes responsibility for order processing, shipping, packaging, and returns. For your part, you need to join the system and transfer correctly packaged products to marketplace warehouses.
You have the opportunity to enjoy the benefits that e-commerce giants have: developed logistics, an extensive client base, access to Prime members, and much more. Since the marketplace takes care of many complex issues, you can spend money and time on the company’s development. You can buy programs and applications purchased with software discounts and coupons to increase productivity while saving money.
This model has several significant advantages for businesses:
- it is not necessary to have your own online store;
- there is no need to rent a warehouse for storing products;
- Amazon deals with disputes with customers;
- you do not need to look for an intermediary company that will deliver goods to customers;
- you will have access to the global market.
The FBA program also has some disadvantages that you should consider before choosing it:
- you can not communicate directly with customers;
- you need to pay fees for participation in the program;
- competition on the platform is pretty high.
In general, you won’t be able to use this model if you don’t have your own items. It means that you need start-up capital.
Dropshipping is a sales scheme that allows you to open your online store without setting up your own production. In this system, you act as an intermediary who takes orders from customers and passes them on to suppliers. You receive a certain percentage from which your profit is formed for such work.
As an intermediary, your task is to attract customers, advertise, communicate with buyers, and establish contacts with manufacturers. That is, you do not need to worry about logistics, renting warehouse space, and timely delivery of goods to customers. However, for your online store to be effective, you need to analyze the market before launching to choose an attractive niche. At the same time, it is also essential to conclude contracts with reliable suppliers; otherwise, you will suffer because of their poor quality work.
This scheme has advantages for those entrepreneurs who do not have their own production:
- low entry threshold, that is, large start-up capital is not needed;
- advertising campaigns and work with clients is completely in your hands;
- low level of responsibility in comparison with the sale of own goods;
- in your online store, you can combine products from different suppliers;
- you can provide the service wherever you are.
Any model has certain disadvantages, including dropshipping:
- from each sale, you get only a percentage, that is, the march is not very high;
- your success largely depends on the quality of the work of suppliers;
- high competition.
Choose the Best Business Model
These two schemes are the most effective for running an online business. Each has certain pros and cons. Can’t decide which one to choose? Here’s a simple tip. Amazon’s FBA program is the best option if you want to sell your own products. If you do not want to invest in production, consider dropshipping.