Dropshipping vs. Amazon FBA — Which is Better for Beginners?

Dropshipping vs. Amazon FBA — Which is Better for Beginners? Speaker 1: If you're trying to decide between Amazon FBA and Amazon dropshipping, then this video will specifically outline for you how to avoid risking your hard-earned money and how to avoid making costly mistakes that could set you back months. Every YouTuber and Instagram guru is going to be telling you why Amazon FBA is better because it's more well known and it's more trusted, but they don't tell you what the actual intricate details involve. Things like spending thousands of dollars upfront on inventory in order for you to make sales. Also risking that thousands of dollars of money on inventory before products even end up selling. And then having to spend numerous different amounts of money on advertisements to get those products to sell. So with all of this and ensuring that you can take care of your family, you can still be able to do things alongside your day-to-day job, make sure your kids are cared for and you're not risking any of your hard-earned money up front, doing Amazon FBA makes it virtually impossible. Now, my goal is to help you leverage the world's most popular platform, Amazon, to your advantage through an Amazon business. By doing so, all without spending money on ads, placing money on bulk orders, Dealing with any sort of foreign based suppliers or needing any sort of prior experience. And I'm going to show you why Amazon dropshipping consistently outperforms Amazon FBA for busy individuals much like yourself potentially watching this video and which one actually puts more money in your pocket at the end of the day. And if you don't know who I am, my name is Shane Canelco and I've been in this space for over four and a half years. Now I've been able to help over 700 people start and scale their brand new Amazon businesses themselves. But everything I show you inside of this video, the results are not typical. Your individual results and what you take from this video is going to vary. Everything I show you throughout these videos is based on my own personal experience and they're solely based for educational purposes only. So let's dive into it. There's no real better perspective I can give every single one of you than telling you what my own personal experience has been. Now, I first came into this Amazon space throughout the pandemic. Before that, I was working as a valet driver and I was studying university full time. But when the pandemic hit, I basically lost everything. So that means I had no job and I ended up dropping out of school because I didn't believe in the education system anymore at that point. So as a broke ex-valet driver who just dropped out of school, Obviously, I wanted to be able to find a way to make money but it was during a specific time during the pandemic where nobody was hiring. We were in this weird transitionary phase where not a lot of jobs were online at that point. So I tried to do a lot of my due diligence and as I was looking to do so, I recognized that the one thing that was Still running during the pandemic was Amazon. People were purchasing more products than ever before throughout the pandemic. But as I was doing my research, I continuously came across Amazon FBA. And Amazon FBA is more well known than comparatively to Amazon dropshipping. Now, the reason for this is because Amazon as a platform is not profitable on their day to day. Where Amazon is actually profitable is in two separate areas. One, through their PPC platform, so where people spend money on advertisements to get their products to sell. And secondly, through the fees that they charge third party sellers to sell products on the Amazon marketplace. So whenever I tried to Google anything or anything along those lines, I kept seeing Amazon FBA, Amazon FBA. And I didn't want to be in a position where because I was let go from my job, I was still in university, I basically had virtually no money at that point, I wasn't willing and wasn't capable of spending Over $10,000 of bulk orders just to be able to make sure to see if they can actually sell. So I wasn't willing to take that ginormous risk just considering the position that I was in. So that really allowed me to do a lot more due diligence on my end. And that's when I came across what is called FBM, Fulfillment by Merchant. Now, Fulfillment by Merchant has three different elements to it. You've got online arbitrage, retail arbitrage, and then you have dropshipping. Online arbitrage is basically the process of going to identify a product from a major big box retailer like Walmart, let's say, sending it to a prep center and then having the prep center to send it directly to the customer store step. Then there was retail arbitrage where you had to go into store, Obviously during the pandemic majority of stores were closed so I knew that wasn't an option. And I didn't want to go through online arbitrage because online arbitrage included another step in the process which means that my margins would be even more minimal. So I knew Amazon dropshipping was the route for me to take because it was a three step by step process. There were no intermediaries besides myself, and I knew that suppliers wouldn't send products directly to the customer's doorstep. So long story short, I decided to go all in on my Amazon business. Now, as someone who dropped out of school, as someone who wasn't working because of the pandemic, I had a lot of time on my hands. And that's what I spent the last four and a half years learning and fine-tuning is my skill set. And getting my Amazon business to the point where I've made over $8 million in total sales in my own personal Amazon store. And this is the same exact model that numerous different other beginners have utilized when starting out to build their Amazon businesses. Someone like Sean, who just sold and shipped his first order. Someone like Erica, where she's a month and a half in, she's already crossed over $10,000 in total sales with her Amazon business. Someone like Christian Van Haan, who was able to get to the point of doing over $2 million in sales in 30 days. But I've been working with him for two years, so it takes time to get to those levels. But what I've realized is a lot of people enjoy this business model simply because they're not so apprehensive in regards to listing products. They're in a position where they can throw as much as they want against the wall and see what exactly sticks. Because in order for you to list a product on Amazon, You don't have to spend money. So if you list a product and it doesn't sell, then you don't lose anything at the end of the day, which is something that's super ideal for a lot of beginners in this space, especially if you have no prior experience, because it allows you to be in a position where you can only learn through the process. You never really lose. You can learn or you can win. Now, don't get me wrong, I've worked with numerous different other people over my years that have tried FBA, have failed miserably, and are now in a position where they're running their Amazon dropshipping store. So someone like Nadine, let's say for example. Nadine was previously in an Amazon FBA program, wasn't getting any results, and didn't like the fact that she continuously had to purchase products in bulk, In order for them to sell, it was just a massive risk, and especially being a mother of two children as well, she was in a very, very tough spot. So that's when she made the transition from FBA to the dropshipping process. And lo and behold, after being part of the program for over five months in a 16-day time period, she did over $124,000 in total sales with her Amazon business. So you very rarely ever see someone going from dropshipping, saying dropshipping doesn't work, to Amazon FBA. It's more so the other way around it. FBA doesn't work for people and then that's when they switch over to Amazon dropshipping because they weren't previously aware of the fact that there was a better way. So now let's talk about the actual startup costs that are involved with an Amazon business. So deciphering between Amazon FBA and Amazon dropshipping. Now we're going to look at basically four different elements. We're going to look at inventory costs, shipping costs, the amount of money you need for tools or different types of softwares and the amount of money that you need to spend on ads. So first let's look at Amazon FBA. So with Amazon FBA in terms of the inventory costs, you're talking about over $5,000 in inventory costs as a beginner. That's just right out the gate no matter what. Then in terms of shipping, usually that will run you an additional $1,000 to $2,000 on top of that. Because you're purchasing such a bulk amount of inventory and it's not going to be coming directly from a specific domestic based supplier and it's going to weigh a lot of weight as well, it's going to cost you a lot to ship the item to a specific warehouse. Now, thirdly, in terms of the tools that you use, it will range anywhere between $100 to $300 per month. And then lastly, in terms of ads, because Amazon FBA does require you to purchase products in bulk, that means that you want to sell those products on an accelerated timeline, which oftentimes means that you're going to have to spend money on advertisements. And that will run you anywhere between an additional $2,000 to $4,000 as well. So, the total startup range for something like Amazon FBA you're seeing at a bare minimum being $4,000 just for the business model alone, all the way upwards of over $11,000 as well. Now, when we look at Amazon dropshipping and other kind of things, inventory cost, zero. Because you're never purchasing the products before they sell, you never have any sort of inventory cost. That's not a point of consideration. Now anything in terms of shipping costs as well, well because we're dropshipping, we're only going from one place to another place, majority of suppliers are going to offer free shipping. But even if the supplier Does charge you, let's say a $10 shipping fee for a product, you're going to include that shipping fee within your listing price of the product that you sell on Amazon. So that way, in hindsight, the customer pays for it within the product that they bought. So that way you don't actually take a hit on your net margins. So the shipping cost is basically zero at the end of the day, because you're not going to be the one that's ever going to be paying for shipping. You're going to have the customers pay for the shipping instead. Now, when we talk about the monthly tools or the different softwares you use, it's pretty similar to what Amazon FBA is. The only difference between FBA tools and softwares compared to the two Amazon dropshipping tools and softwares, with Amazon FBA, you're going to get a lot of data with the tools. There's a lot of graphs and charts and price points that you're going to need to be looking at because You need to do a lot of research and data analysis before you go ahead and purchase 100 units of a product that's going to cost you $10,000. But with dropshipping, we don't need access to that much data. So that's why I use a tool called AMZScout. And AMZScout is basically anywhere between $50 a month or it could be a one-time fee of $200 as well. And then in this last point of consideration, when we talk about the ads element of things, you don't need to spend money on ads in order for you to get your products to sell when you're dropshipping on Amazon. You're not so pressed on the products you list selling within an accelerated timeline. So the more products you list, the higher the chance of you actually making sales. And we're also focusing on listing products From brands that people already know, like and trust. So where attention goes, money flows at the end of the day. And we're just positioning our products and our product price points in a way where people are going to end up purchasing directly from our storefronts. So with an Amazon dropshipping store, you can see the startup cost anywhere between $100 to really just $500. At the end of the day, it's basically minimal and that's only for the business model itself. Now, to be clear, this is something that one of my students, MJ, used for her to be able to build her Amazon business to $58,000 in total sales in just four months of starting. Same thing with someone like Nadine, who did that $124,000 in 16 days, Amazon dropshipping. Someone like Heather and Ben, where now they're at the point where Heather, his wife, has been able to quit her full-time job. That's through Amazon dropshipping. Now, outside of the cost, what is my real personal opinion and which one really works best for people that are completely new to this space? Well, it's very simply going to be Amazon dropshipping because as a beginner, you don't want to lose money, right? You may not want to lose time that you spend towards this and making no results, yes, but you most importantly don't want to lose money by starting something brand new. For the majority of people that I've worked with the last four and a half years, these are busy professionals. They work the day-to-day job. They have at least two children. They do specific things. They have errands to run on the weekends. You're not in a position where you have to continuously add more stress on your shoulders because you purchased 100 units of a product and you're not 100% certain that it's going to end up actually selling. And even to that point, you don't need a lot of time to make this work. We're focusing on working smarter, not necessarily so, so much harder at the end of the day. So if you're completely new to this space and you're scared about that risk of failure, which is a total normal feeling, you have to think about how can you stack the odds in your favor of you being successful with this, or at least at a bare minimum, you not losing any money. And that's why Amazon dropshipping, there's such a low barrier to entry for people to get into it. But it's one of the least known business models out there, because very few people know how to do it. And very few people know how to do it the right way when it comes to selling on Amazon as well, which is What I've spent the last four and a half years of my life really perfecting, really making sure I know how to do it myself with my own Amazon store so that way I can be able to actively teach it to people like yourself and my over 700 mentorship students also. Now look, don't get me wrong, Amazon FBA works. It does work just like anything else in the world. There are other things that do work, but just in my own personal experience, what I've seen for busy professionals who aren't willing to risk tens of thousands of dollars of their hard-earned money on products that they don't have 100% certainty are going to sell, Amazon dropshipping is a clear winner day in and day out. Now, if you feel like you got any sort of value from this video, then please go ahead, click that subscribe button, hit the like button, and I hope you all understand the differences between Amazon FBA and Amazon dropshipping so you can figure out which one would be best for you. I'll see you all in the next one.