Amazon vs Dropshipping

Today we’re gonna talk about drop shipping so on this channel I usually talk about Amazon FBA because that’s what I do but we’re gonna talk all about drops should be today first I’m going to explain to you the

difference between the three ways of kind of selling products online letters super hot right now which is drop shipping amazon FBA private labeling and retail arbitrage you might not know the differences so I’m going to summarize this for you and then I’m going to go into the advantages and disadvantages of having a drop shipping business alright so let’s start off with Amazon FBA private labeling this is kind of like I mean most of my videos are on this topic what you know the gist of it is you find a product that you want to sell on Amazon you find a manufacturer that is selling that product that manufacturer might be locally but it also might be overseas like in China then you give the manufacturer your branding you slap a label on the product have your brand name on the product your logo and then you place an order with the manufacturer so you have to pay ahead of time for your inventory so you might order 500 units you might order a thousand units but you have to pay for it ahead of time so that’s the major difference here you pay for it ahead of time and then once the manufacturer is done manufacturing they’re gonna ship it either to your house or directly to the Amazon FBA warehouse and then you are now going to be selling on Amazon and you can become fulfilled by Amazon which is FBA which just means that now Amazon’s gonna fulfill your orders so your inventories at their warehouses they’re gonna ship the inventory to customers whenever someone places an order they take care of all the handling for you they take care of the customer support for the most part and they handle returns and it’s pretty much that’s pretty much it that’s Amazon FBA and then you start making sales

now drop shipping is is different it’s where again you find a product that you want to sell a product that’s already selling well potentially doesn’t have many sellers and then you find a manufacturer that is able to drop ship this product for you

now there’s not that many manufacturers that like to do drop shipping because basically means they’re selling you one product at a time versus a whole lot of products so what happens is you have your own Shopify store or Amazon or wherever you want to sell this product on as soon as a customer buys the product so say I have a Shopify store someone just bought my product I listed the product or on Shopify I don’t have inventory at my house but I list the product on Shopify and a customer just bought it I got a notification on my phone immediately or whenever possible I now go to my drop shipper manufacturers website and I place my order and I input the customers shipping address instead of my shipping address and so now the manufacturer ships the products straight to the customer and so the difference between this and private labeling I mean there’s many differences but the major difference as you can see is that I’m not purchasing inventory ahead of time I’m not putting any money down you know I’m only purchasing from the

manufacturer when I have a guaranteed sale from a customer someone already paid me has already put in their credit card their payments processing right now with PayPal that’s a guaranteed sale and then I placed my order with the

manufacturer or one at a time okay so that’s just that then we’ve got retail arbitrage which is very different but for some reason it can get confusing retail arbitrage is where you’re

flipping things okay so you’re trying to find the best deal possible so you might go to thrift stores and you might find products that are still in their

packaging and then you buy them for a very very cheap price

say for example $2 $1 and then you sell one on Amazon for what they’re worth so if that product was selling at the thrift store for $2 you could maybe sell it on Amazon for $20 and you make technically not an $18 profit because you still have Amazon fees but you get the idea

so you’re flipping them to make more profit you can also go to Walmart and find products there that are cheaper than what they sell on amazon.com and this is a this is a business model this isn’t really a business this is a way to make fast money a small amount of money fast money so I did this in the past where I needed to make money really quick and so I would go thrift stores I buy all this stuff

I’d scan it you can get the Amazon app to scan it and then you find out if it is selling well or not on Amazon you shipped Amazon and you make your profits but it’s very much like hustle hustle hustle you always have to find new products and it’s not really sustainable but if you guys want to learn more about retail arbitrage comment down below let me know and I’ll make a separate video on this topic ok so that is the summary of all those things now where do you drop ship from like how do you find suppliers to drop ship your products well there’s 3 different places that you can find suppliers number one is you can go on Aliexpress I’ll Express you’ll find supplier is mostly in Asia mostly in China and you will find them very easily for whatever products that you want to source you can also find a drop shipper on Aliexpress that is able to drop ship your product but is also able to private label your product so if you want to start off with drop shipping they can start that way and then if you see potential with the product you can eventually private label that as well but that’s a totally different subject all right second place is you can find your supplies locally so you can find local manufacturers that are able to drop ship your products for you this is a really great option because you’re able to build a real business this way you’re building real relationships with locals and we’re gonna talk about some of the advantages of this as well when your drop shipping from Aliexpress from China it can take you know two weeks four weeks six weeks for the product to arrive to the customer versus if your drop shipping locally and your selling to someone locally you know they’re gonna receive it in a very reasonable timeframe so that’s another option the third option is to drop ship from your local you know big shops like Walmart you know Toys R Us and again you go in you go on their website you find things that are discounts they’re on they’re on sale say you know it’s like a 20 percent 30 percent off sale and then you can also list those on your website

and sell them for more so three

different ways of doing it all have their advantages and disadvantages let’s get into the advantages of drop shipping alright so I think the most obvious advantage is that you don’t really need a big initial investment right so you have very low initial cost you basically just set up your store and you’re gonna have some costs for marketing but you don’t have to invest in inventory and that’s one of the largest most expensive cost inventory and shipping with Amazon FBA so you don’t have that cost so what that means is you’re just gonna have you’re gonna see more profits faster so that’s definitely an advantage I mean other advantages you don’t have to manage stock so you don’t have any overhead really with that you basically just ship products you know as the orders come in and you don’t have an inventory or a house you don’t have a filming center it’s coming going

straight from the manufacturer to the person itself I mean also it’s just very easy to get started you can start with a very low budget like we discussed and I think also just an advantage is being able to you know not really be invested in the business so for example you know if you are doing a seasonal product say it’s ugly Christmas sweaters you can dropship those you can set up your Shopify shop by site and then you can start drop shipping those for November and December and then comes January you can just close down the site and then you don’t have to worry about you know all this inventory that you didn’t sell out right because there’s no inventory right you’re just putting in sales as the customers are buying so it makes your investment into the business very minimal and it’s very easy for you to close down the business if you want to or if you have to all right so let’s start with the disadvantages of drop shipping so I think number one the biggest disadvantage is the shipping time so for most people they are drop shipping from you know overseas from Asia from China and you can ship to the states with a packet and it can arrive in like two weeks which is okay but for the most part of your shipping to the UK Australia it’s gonna take four to six weeks and that’s just a really really long time frame for a customer to wait especially nowadays when everyone is so used to getting their shipments like that you know Amazon Prime two days shipping at your doorstep before you even know it you know and so people are really getting accustomed to this fast shipping we’re really spoiled and so when they see that the product is going to take so long to arrive that’s a big turn-off for customers and then

oftentimes people customers they don’t actually realize the shipping timeframe for some reason you know they don’t read that part they place their order and they’re like well it’s been two weeks where’s my order and you remind them it can take four to six weeks for your order to Rive and they get really mad and then they want to refund so it just leads to a really bad customer

experience and in fact if you’re gonna be dropped shipping so let me point out that some people drop ship on their own Shopify store some people drop ship on Amazon and eBay I’m probably gonna make a separate video about this because you do not want to ship on dropship on Amazon and eBay

you’re gonna dropship do it on your own store and the reason for that is because on Amazon and on eBay

especially Amazon like your profit margins are gonna go down significantly because the Amazon FBA fees are really high you’re competing with other Asian sellers people from you know other sellers from the manufacturers the you know from China they’re selling their products on Amazon at very very low prices you cannot compete with them and then also it’s like again the shipping you know Amazon customers are used to fast shipping and if your products gonna take you know two weeks shipping that’s way too long for an Amazon customer so keep in mind that when someone goes online to purchase a product for the most part they’re not going to

anticipate that they have to place their order four weeks ahead of time a month ahead of time so for them it’s like they need a product they need it now within the week within the next two weeks and so if you can’t deliver that they’re not going to be happy about

that so I think another disadvantage is that you are always on call so whenever someone places an order you get a notification on your phone you can get a notification on your phone and then immediately you’re gonna want to contact your supplier to put in an order with them and so you’re constantly living in this state of reaction of you know anticipating the next order and for me I value my lifestyle I value my time away from electronics I find it really valuable to have that space and I feel like when you have a drop shipping site you don’t really have that until you can automate that until you can outsource not just someone else so you want to serve on your own website and you don’t want to start on Amazon or Ebay and the disadvantage of not being able to start on Amazon or Ebay is that you now have to rely on your own marketing skills and you have to rely on yourself being able to deliver so being able to take out site traffic external traffic and bring them to your website whether that’s through social media whether that’s through Google Ads Facebook Ads whatever it is that you have to do you have to master that and with Amazon you can turn on Amazon pay-per-click ads and

oftentimes you’ll naturally start to see sales when you first launch a product I mean you do still need to do that external marketing it’s still necessary but it’s much easier on Amazon because there’s such a wide customer base and on Shopify you just don’t get that so it’s up to you to drive traffic to your listing and so you might have the best product in the world but if it’s not in front of anybody’s eyes if they don’t see it if you’re not doing a good job at marketing they’re not gonna buy it because they know how to exists so you really have to really perfect your marketing and really know what to do and spend some money on it so another thing is refunds you know a customer refunds the order it’s usually pretty much at a loss there’s ways of making sure that you’re not at a loss but if you don’t have a really good refund policy in place then oftentimes you know where’s that product gonna get shipped to is it gonna get shipped to your house is it gonna get shipped to the manufacturer like you’re gonna end up with a bunch of products in your house

don’t want sir refunds can end up being at a loss instead of restocking your inventory keep in mind also that amazon does have a 30-day no questions asked return policy and so if you are planning on drop shipping on Amazon you can’t have your own refund policy you have to adhere to amazon’s refund policy and so if a customer wants to return the product they open the product think you said things like I don’t want it anymore they return it there’s nothing you can do about it so you are at a loss again which is another reason why you want to have your own website so that you can have your own return policy okay and now there’s just this vantage is that you can just come into a lot of problems you know quality issues with manufacturers that you don’t have a really long term relationship with or you haven’t seen the products before yourself another issue is that you know for example say I’m sourcing a product from Walmart calm and I know that the product is on sale for 24 dollars and I’m selling it on my Shopify store for 35 dollars and then someone on my Shopify store at places their order but then I go straight to Walmart to make my purchase on Walmart and that product is out of stock or they no longer have it in stock so that will create a negative customer experience and that customer will either not return will give you a negative review

somewhere or will just be upset and you want to always deliver the best you can for your customers I find that with Amazon FBA you have to do that on Amazon people can leave your reviews and if you’re trying to build a brand you want to deliver the best customer experience I find often times with drop shipping there’s a lot of like not so cool things that happen where you know people pay for a product and then drop shippers don’t send it and it’s just kind of like just not incongruent ethically with kind of what I would do with my Amazon FBA business so there’s more potential for just a negative customer experience you have to really be on your a-game about that

there’s also an overcrowded market there is like I said more suppliers that are going to privately believe products then there are that are going to dropship you products you do have to do your research but oftentimes it’s gonna be the same supplier drop shipping to you as they’re dropping shipping to thousands of other people just like you so there is quite an overcrowded market you’re gonna find that there’s a lot of people selling the same thing from the same drop shipper so you have to find ways to stand out okay another thing is just that it’s hard to find a reliable manufacturer sometimes they don’t send you their products and then that causes a conflict you know not only do you want them to send it as soon as possible so we can have you know fewer days until the customer sees the product like better shipping time but also you want to make sure that they’re actually sending the production

oftentimes not oftentimes but sometimes they don’t send the product okay guys so those are the advantages and

disadvantages of drop shipping hopefully you guys enjoyed this video let me know in the comments below if you’re thinking about drop shipping and why it is that you want to do it where you’re gonna be drop shipping on your on your own website or on Amazon on ebay let me know I’d love to know what you guys are up to and like this video if you received any value from it and don’t forget to hit the bell notification so you get

notified for my next video have a great day guys bye

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