Hey guys welcome back to my channel my name is Jacob, today I want to talk to
you guys about Amazon FBA vs. drop shipping so first let me explain both of
them to you guys so what is Amazon FBA so amazon FBA is essentially a process
where you're creating a product and you're taking it all the way from design
to amazon.com and you're selling on their platform so it starts with product
research where you're identifying opportunities within the market then it
goes to the product development phase where you're identifying suppliers
working with them to create the product they need move to productions you then
move to importing the product and then ultimately sending the product in to
Amazon so that you can sell that product on amazon.com or any of the other Amazon
platforms across the globe what is drop shipping so drop shipping
is somewhat similar to this in the aspects that you know there's also
products that are being created but you're not a part of the production
process so drop shipping is usually you getting products that are already made
by a supplier so essentially getting approved to sell those products then
you're creating either listings on other selling platforms or maybe a Shopify
website ultimately where you can create these listings for these products or
line of products that you can sell to people by driving some type of marketing
effort towards them a lot of times that's usually with Facebook ads or
something similar to that but you can get maybe people that are interested in
those products to there and essentially what you're profiting off of is is the
difference in price between what you're getting wholesale from these suppliers
and then are actually selling retail to your
customers so let's talk about the pros and cons of each one of these starting
with drop shipping so the number one the number one pro of drop shipping is
definitely the low barrier to entry it doesn't take a huge investment in terms
of money you can get a business up and running relatively quickly
probably even within a week depending on what your skills are as it relates to
building websites and just a little bit of e-commerce knowledge you can get
access to products almost immediately you know depending if you want to work
with a certain manufacturer or a certain supplier that you kind of have to go
through an approval process for if you wanted to sell things off of Aliexpress
or something similar to that you could pretty much just go identify the
products that you want and create a Shopify store put those listings
directly on there and as soon as you start running Facebook Ads pushing
client or customers to those to those listings you're in business it doesn't
take a lot of skill right as that's another one of the big pros it doesn't
take a lot of skill you you don't have to do tons and tons of research to
identify product opportunities you're just essentially identifying products
good suppliers building your website out and then coordinating for all that stuff
to work when you're running the ads and and then processing the orders and
everything okay so what are the pros to Amazon FBA so the pros the Amazon FBA
are are a couple of things the first one that we'll talk about is it usually has
a higher ROI so usually when you're selling these things on drop shipping
sites from Aliexpress or or straight from suppliers you're gonna be just
profiting on that amount that you're getting it from wholesale to the amount
you're selling for retail usually when you're manufacturing these products a
lot of times with a way way steeper discount these companies that you're
going to be working with for suppliers to produce your goods they're going to
be producing these goods for you at a much more discounted rate and you have
to consider they don't have to have really any marketing budget or anything
like that in order to get connected with you and you're producing these products
with them directly so you know a lot of times you're just having to cover the
cost of their you know workers with the actual cost of the material itself so
your ROI usually got a lot more control over that ROI and it's usually much
higher than it is for dropshipping products next is is essentially the the
overall process and after you start selling on Amazon one of the biggest
benefits Amazon is a it's it's a massive massive machine that takes care of most
things for you and it gets it's getting to be more and more every day but once
you get those products and you send them into amazon fulfillment warehouse they
take care of almost everything for you if they take care of the shipping they
take care of the pulling it off of the shelves the storing it putting it in
boxes shipping it to your customers within the specified time that they
agreed upon when they made the order they take care of customer service for
you they also process returns for you and they collect money for the sale on
your behalf and in a lot of cases they even collect taxes on your behalf as
well so a lot of benefits to that which keeps you out of the operations of the
business and allows you to focus on just expanding your business which is huge
another thing is it's a more of a long-term strategy and a sustainable
business model in my opinion because you can really build out a brand and why
that's important is is well they think about your life and how
that applies and how many times that you've bought brands over the course of
the year because of your awareness of those brands or your allegiance to those
brands and the reality is is that those brands are selling you those Goods at a
markedly higher price then someone else who probably has a very similar quality
that doesn't have as much brand recognition as them and that connects
huge because this can really really increase your ROI as your brand
awareness increases and that's not something that you're going to be able
to scale in drop shipping also the life cycle of these products tend to be
longer I've had products that have been running for many many years and I don't
see any signs of them slowing down and this is something that I just haven't
met a lot of people that have had that kind of success with drop shipping
because of the level of competition and
just amount of people constantly coming into the market alright guys so let's
talk about the cons to vote if the first one is constant drop shipping and it's
also the same thing that is a pro for drop shipping and that is the low
barrier to entry and this applies to pretty much everything that I've I've
done in my life but when you look at something that has a low barrier to
entry it's I mean let's just face it I mean there's a ton of entrepreneurs in
this world and if they can potentially dip their toe into something without
having a huge risk well that's really appealing to a lot of people and so what
this causes is is it causes hyper competition and with something like that
it's it's it's tough because well obviously there's more competition but
that just increases the landscape of change and and the rate at which it
changes all the time so if you're constantly having hundreds of thousands
of people that are coming in to be your direct competition with these products
and suppliers and so forth then you're constantly going to be subject to having
to improve your business model all the times right and and that's just the way
that it is and I personally don't like to get into something that's hyper hyper
competitive in fact things that I find in my business I try and go after
products that are low competition specifically for that reason because I
don't want that many people attracted to doing the same thing that I'm trying to
do or finding ways to do what I'm doing better all the time it's just it's not
easy to sleep at night when you're worried about that consistently
especially if you have a lot of money in something the next thing is there's
there's a lot of scams so with high competition comes a lot of scams and
that's something that you constantly have to be on the lookout for is you're
trying to develop your business you know falling victim to one of those scams and
potentially losing a large amount of money especially in in the beginning
phases can really just crush anything that you're trying to do as a new
business opportunity the other thing is is that you don't really have this is a
year product you're getting it from suppliers so you don't really have
direct control of products and quality of those products all the time so for
example with mine you know I'm I'm constantly doing I'm console doing
audits I'm constantly doing inspections on products to ensure that there's
consistency within my products right because it's made change from one day to
the next I mean these people that are producing these they own these factories
you know these for these products I mean they're changing out employees just like
any businesses and if you don't have the ability to stay on top of that stuff
with inspections or all our factory audits or anything well then you're
really just subject to whatever they ship to your customers and your business
is kind of dependent on that especially in today's day and age where you know
reviews mean a lot of things to everybody that's buying online and that
could be really detrimental to you the next thing is is that if you're going to
do it right a lot of times you have to get
by these quality suppliers right you don't just want to go in and just pick
anybody off of Aliexpress now you really want to get quality suppliers so that
you can affect as much as you are able to with the product quality of those
things in the consistency on that quality and also because you're probably
going to do you know a homogeneous line of products and so it just kind of makes
sense also but you know they don't want to just work with anybody either I mean
they want to work with people they're going to benefit their business and so
you know there's usually approval process for that so that's not always
right away you might not be able to get the things that you that you really want
also the other thing is is that you know nobody's doing the customer service for
you all the time so a lot of times you're having to manage all this stuff
and when you get caught up in the operations of things sometimes you're
kind of just exchanging your time for money right and and that can be tedious
and it can limit the amount that you can expand this business and and scale
alright guys so what are the cons to M is on FBA so with Amazon FBA there is a
higher barrier to entry you know there's an initial investment that has to happen
when you go to do your first run of inventory there are kind of tips and
tricks that I I do teach some of my students and my coaching clients on ways
that you can do this with lower risk and even some ways that you don't have to
put a huge initial investment upfront but the reality is is there's always
going to be some investment up front as with dropshipping a lot of times you
know you don't have that much with Amazon you potentially do and you know
with each one of my products I do have an initial investment up front that I'm
going into the market with so that that's an attractor for some people some
people you know just really don't have the money or aren't resourceful enough
to be able to find other ways to get the money okay the next thing is is that
there's a timeline right so from concept to market you know we talked about
identifying the products identifying suppliers going into production so
there's a little bit of a timeline you know can be a couple of months from
concept to market where you're able to actually get these things landed in
Amazon and start selling them on on amazon.com and so you know that could be
several months and sometimes people well they don't want to wait that long and
that maybe their interests change you know maybe the market changes in that in
that period of time these are all things that can potentially be mitigated
against but you know the reality is that there are some risks as it relates to
any business model and this is one of them for for Amazon FBA and the last
thing that's kind of a con for Amazon FBA is is this a little bit of limit in
the reporting forward your sales on there so you don't you know you know a
lot of times what your conversion rates are with stuff but you may not always
know exactly where your conversions are coming from right so a lot of things are
keyword driven with sales on Amazon or pretty much any platform that you're
selling on e-commerce and if you're selling organic sales on Amazon then
you're not always gonna have that data for where those sales are actually
coming from and sometimes it can be difficult when it comes to SEO
optimization for those products alright so guys overall what's my opinion when I
compared the two models and I did this before I initially started doing any
sales on e-commerce and there's a couple determining factors for me but bottom
line is is that in my opinion FBA is a much much better opportunity the first
thing is is that I don't like low barrier to entry business plans because
it just attracts a lot of people into the market and the more competition that
you have the harder it is for you to stand out and ultimately be successful
in any field and that's not what I want I I don't constantly want to have
challenges if it's already competitive as it is next is is that I think that
FBA is more of a sustainable long term strategy when we talk about building
brain and building brand awareness and
strategizing kind of around that does this think that have been done forever
with almost every single type of product in the world and brands are extremely
extremely powerful and there's really no limit to it it's created billionaires in
very short amount of time especially when you're talking about clothing and
it's it's just a very very very proven business model for an extremely long
period of time it's it's also an easily sold business so if you're someone who
does like to get in and out of investments or opportunities and you
kind of are just a serial entrepreneur this is a great thing as well because
it's this is an easily packaged and sold business if you do Amazon FBA you build
a brand you have a line of products you've got social media following you
know you've got brand awareness you're on multiple platforms this is easy for
investors to understand right I mean they can come in they can evaluate your
business very simply and you can put together an offer really easily for them
and it's just a no-brainer you know and and this isn't hard to find so the
turnover for something like this is easy and that's that's an awesome strategy I
go in-depth with that with a lot of people that I coach on how to do things
like that so that they can make a lot more money in a shorter amount of time
and continue to build and build more the other thing is is it's super rewarding
and and and maybe that's just me personally but I find a lot of personal
pleasure and seeing something that I've created be manufactured be brought to
market and then ultimately be positively received by you know customers within
the the category that I'm dead I'm selling it and and I think that it's
cool that you know I'm able to be someone who's just a guy who can work
with suppliers across the world to facture products you bring them to the
States and put them right next to on the shelves with hundreds of other major
major brands that have been established for a really long time and and compete
well with them and more often than not outsell them in the categories that
they're selling it alright guys well I hope you guys got something out of this
video I really wish you guys nothing but success on on your journey whatever you
guys decide to do whether it's Amazon FBA or drop shipping if you did it if
you did get something out of this video give it a thumbs up give it a like and
comment down below and subscribe and I hope to see you guys back here on the
next one
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