This transcript was generated from the episode audio and may contain minor errors.
[Music]
What's the difference between drop shipping and fulfilled by Amazon? That is what we're gonna talk about today. Quite similar in some ways, but there are some differences. Which e-commerce model is best for beginners? Either way, you're not holding any inventory.
I'll just say that up front. If you're gonna sell something on e-commerce, you don't have to fill up your closet or your apartment or your garage with a bunch of stuff. There's all kinds of ways you can sell things online, but you don't actually ever touch them. And with both of these models, then that's the case. Still, there are some differences as well.
So let's talk about it. We're gonna hear from Natalie. She has been looking into e-commerce business ideas, wants to know the differences. What is the best platform to sell on? Kind of like Amazon and everything else, just to say that up front.
But these ways do work a little bit differently. So let's break it down and see which model might be more suitable for someone just starting out. By the way, if you have a question for the show, you know where to go. Well, you might not actually, if you just tuned in. So if you don't know, you go to sidehustleschool.com/questions.
You can add a question, submit a question that we might answer here for our global audience. And I really appreciate everybody who has been part of the podcast for 2,794 days and counting. That's right, it is a daily show, seven days a week. So today, what's the difference between dropshipping and FBA, also known as Fulfilled by Amazon, detailed question and my answer coming right up. [Music]
Hi, Chris, I'm Natalie from Denver.
So I've been researching different e-commerce business models and I came across dropshipping and Fulfilled by Amazon. So both seem like great ways to sell products online without holding the inventory, but I'm not really sure how they differ. Do you think you could explain the key differences between dropshipping and FBA? Also, which model do you think would be more suitable for someone that's just starting out? I've been listening to your podcast for a while now and your insights have been really helpful.
I also really enjoyed the $100 startup. [Music]
All right, Natalie, I love your idea. I love that you're exploring. We've got lots of people out there who are selling e-commerce products in various ways. So one big difference here, dropshipping is you are not just hands off, you are very, very hands off.
You don't actually own any of the product. You're basically just selling the product on a website. Then somebody else takes over, ships the product. They provide customer service support. It's not your inventory, basically.
Whereas with Fulfilled by Amazon, you don't hold the inventory, like you don't actually keep it in your garage or apartment or closet, as mentioned, but it does belong to you. Like you have actually shipped it to Amazon. So you have manufactured a bunch of stuff in China or elsewhere, or you have bought a bunch of stuff from Alibaba or Timu or some other provider, and you have had it shipped to a warehouse that Amazon tells you, and they give you very specific instructions on how to do it. And then the orders get placed through Amazon, Amazon ships them out and such. So you don't actually handle the inventory, but it does belong to you.
So that's one key difference, whereas dropshipping is just completely hands-off entirely. Both of them have low startup costs, perhaps even lower for dropshipping, since you never need to purchase any inventory upfront. Dropshipping also has lower profit margins though, because you're buying products individually, most of the time from suppliers, your profits are lower compared to buying in bulk, which is what you will do when you're working with Fulfilled by Amazon. So what is it that you want to do? What kind of budget do you have?
Are you really just kind of exploring the world of side hustles? Well, maybe you don't want to spend, you know, a few thousand dollars minimum on a bunch of, I don't know, what do you want to buy? You know, air fryers or hand warmers, whatever it might be. I just came up with those two things off the top of my head. It could be anything by buying thousands of these items potentially and sending them to a warehouse in Amazon, which are then going to be charged fees for storage and fulfillment.
So if nobody buys it, then that's your problem. Maybe you don't want to mess with that. On the other hand, your long-term success is probably going to be better with the Amazon model, just because there is a little bit more complexity. Sometimes complexity is a barrier to entry. And if you can overcome it, then, you know, you have made it past a lot of other people who have just wanted to like sign up on a dropshipping website and put up their own sales page and then hope that lots of money is going to come in.
And that's not usually how it works. So if you have a little bit of capital to invest, I think FBA is a better approach. If you're just trying to explore and do different things, decide what your real side hustle is going to be, and maybe dropshipping is good. Good luck, Natalie. Thanks for the question.
Listeners, good luck to you as well. Thanks for being out there. sidehustleschool.com/questions. As mentioned, we'll continue to feature them throughout the year, along with updates from other listeners as they launch and grow their projects. That's all for today.
My name is Chris Guillebeau. This is Side Hustle School. [Music]
From the Onward Project.
