Don’t waste time building someone else’s business. Learn about dropshipping vs Amazon FBA for passive income and take an in-depth look at two popular business models.
You’ve heard about passive income, and you know it lets you shatter the “time for money” cycle. But do you know how so many entrepreneurs pull it off? The answer is you need a tested and true business model to get a passive income business up and running.
Every passive income business takes time and some funding to get it just right in the beginning. But after a few months or even a year, an authentic passive income stream should run itself with little to no daily maintenance. And no matter what, it’s smart to have an asset at the end of the day that you can sell for hundreds of thousands (if not millions) of dollars.
So even though there are quite a few passive income models to explore, like real estate investing, day trading, and freelancing, we’re going to take a look at two of the most popular. Let’s dive into dropshipping vs Amazon FBA businesses, and why they will (or won’t) work for you.
Dropshipping is a simple e-commerce business model with a few key differences. The seller (or dropshipper) advertises a product that customers want, and customers can buy that product online.
But when an order is placed, the dropshipper’s supplier fulfills the order — instead of the dropshipper. Popular dropshipping suppliers include Alibaba, AliExpress, or Oberlo. In addition, dropshippers only sell products that they don’t own or make themselves. In short, you’re the middle man between the supplier and the customer.
The dropshipper never stores, handles, or ships any of the products because the supplier takes care of warehousing and fulfillment. This means dropshippers are only responsible for marketing and customer service, and there’s little to no startup cost.
Sound like a dream come true? For a lot of people, dropshipping is like hitting the jackpot. You get to start and build a business without any of the logistics. But there are some drawbacks like:
1. You don’t own the product you sell
2. You can’t control the brand that you represent
These don’t seem like huge setbacks, yet they are. Because you don’t own the product, you don’t get to set the price — the market and your competitors do.
For example, let’s say you want to dropship a certain scented candle. There are other dropshippers out there selling the exact same candle. In order to sell more of the exact same candle than your competitors, you have to price it lower. But you can’t because you don’t own the brand — you only facilitate the sale. And because of this, dropshipping profit margins are notoriously low.
Amazon FBA businesses and dropshipping use a similar model. Both models let sellers:
• Market products and sell them online
• Store products in someone else’s warehouses
• Leverage a supplier’s ability to ship products
When we take a closer look, however, the differences between the two become clear. The table below outlines the important ways in which Amazon FBA businesses give sellers an advantage over dropshippers — take a look.
| Amazon FBA | Dropshipping | |
| Can you sell online? | Yes | Yes |
| Does another party store your products? | Yes | Yes |
| Does that same party ship your orders? | Yes | Yes |
| Do you own the product you sell? | Yes | No |
| Can you brand the product you sell? | Yes | No |
| How high are your profit margins? | High | Low |
| Can you sell your business if you want to? | Yes | No |
| Are you at the mercy of your supplier? | No | Yes |
| How easy is it to scale your business? | Easy | Hard |
Notice where the changes occur in the table above — it all starts with whether you own the product you sell. Dropshippers can’t own their product, but Amazon FBA sellers can.
Instead of purchasing branded products off of a wholesale site, Amazon FBA sellers contact private label manufacturers/suppliers to brand their own product. When your private label products are ready, your supplier ships them in bulk to Amazon. Amazon stores your products, then packs and ships them on-demand when an order is placed. If any of your customers have a question or complains, Amazon takes care of it for you (unlike dropshipping).
The Amazon FBA business model saves sellers countless hours of work compared to dropshipping and it leaves you with a real, valuable asset you can sell to a potential buyer.
Plus, as an Amazon FBA seller, your products automatically qualify for fast Prime shipping options. Even if you manage to sell on Amazon as a dropshipper, your customers won’t have the same incentives to buy.
Unlimited earning potential, no 9-5 schedule, and no boss — it’s no secret that there are entrepreneurs out there living the dream with passive income. But as you’ve learned, some passive income models are better than others. So how do you make the right choice and minimize risk?
The answer is to start by reading Change Your Life With Passive Income — Amazing.com’s FREE eBook that tells you everything you need to know about financial success. Inside you’ll have access to tons of inside information about:
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