Amazon FBA vs Dropshipping in 2023! Which one is better?


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The world of e-commerce has been revolutionized by a number of business models, each having its own unique advantages and drawbacks. Among the most prominent models are Amazon FBA (Fulfillment By Amazon) and Dropshipping. While these models share similarities, they differ significantly in their operational aspects. This post compares these two influential models to help you choose the one best suited to your business needs.

What is Dropshipping?

Dropshipping is a model where the retailer doesn’t keep products in stock. Instead, when a product is sold, the retailer purchases it from a third party and has it shipped directly to the customer. In this model, the retailer is essentially a middleman between the customer and the supplier.

Amazon FBA vs. Dropshipping


Before delving into the specifics, let’s understand the fundamental aspects of Amazon FBA vs Dropshipping.

What is Amazon FBA?

FBA is a service provided by Amazon where sellers store their products in Amazon’s warehouses. Amazon takes over the entire process from storage, packaging, and shipping to handling customer service and returns. This allows sellers to focus on other key aspects such as sourcing products and marketing.

1. How Amazon FBA Works

When you sign up for Amazon FBA, the process is as follows:

  • You ship your products to Amazon’s fulfillment centers.
  • Amazon stores your products in their warehouse.
  • When a customer orders your product, Amazon picks, packs, and ships it.
  • Amazon handles customer service and return management for these orders.

2. Costs Associated with Amazon FBA

Amazon FBA comes with a variety of fees, which include:

Referral Fees:

These are the selling fees that Amazon charges for each item sold, typically ranging from 8% to 15% depending on the product category.

Fulfillment Fees:

These fees cover the cost of storing your products in Amazon’s warehouses and shipping products to customers. The fees vary based on the size and weight of the products.

Storage Fees:

These are the costs for storing your products in Amazon’s warehouses. Storage fees are higher during peak seasons (October – December).

Amazon FBA vs. Dropshipping

3. Advantages of Amazon FBA

Ease of Shipping:

Amazon handles all the shipping processes. This can simplify logistics for sellers, particularly those selling large volumes of products.

Customer Trust:

Products fulfilled by Amazon are often more trusted by customers due to Amazon’s reputation for reliable fulfillment and customer service.

Prime Eligibility:

FBA products are eligible for Amazon Prime, giving access to a large customer base who prefer or exclusively shop with Prime due to benefits like free two-day shipping.

Multichannel Fulfillment:

You can use Amazon FBA to fulfill orders from other sales channels outside of Amazon.

4. Disadvantages of Amazon FBA


Amazon FBA can be expensive. Between the referral fees, fulfillment fees, and storage fees, the costs can add up quickly, especially for low-margin products.

Less Control:

As Amazon handles the packaging and shipping, sellers have less control over their brand presentation. All orders are packed in Amazon-branded packaging.

Inventory Risk:

If products do not sell, sellers may be stuck with unsold inventory in Amazon’s warehouses. Amazon charges long-term storage fees, which can eat into profits if items don’t sell quickly.


Amazon’s rules and regulations can be complex to navigate. Non-compliance can lead to penalties or suspension.

What is the difference between Amazon FBA and Dropshipping?

1. Startup Costs

Amazon FBA

The initial costs associated with Amazon FBA include purchasing your products in bulk, Amazon’s seller account fees, and FBA fees which include storage and fulfillment fees. Therefore, the initial investment can be significant depending on the nature of your products.


Dropshipping, on the other hand, requires much less initial capital. You only purchase a product once you’ve made a sale and been paid by the customer. Therefore, you don’t have to invest in bulk inventory. The main costs include setting up your website, marketing, and purchasing a sample product for quality assurance.

2. Control Over Branding

Amazon FBA

While Amazon FBA simplifies the logistics, it also reduces your control over branding. Since Amazon packs and ships your products, they do it in Amazon-branded packaging. The direct relationship with the customer primarily remains with Amazon, and customer loyalty tends to be more towards Amazon rather than your specific brand.


Dropshipping offers greater control over branding. You can customize your website, product packaging, and inserts in the package, building a direct relationship with your customers. You can shape customer experience directly, which may lead to more repeat customers.

3. Inventory Risk

Amazon FBA

Since Amazon FBA requires buying products upfront, there’s a risk of being stuck with unsold inventory. Furthermore, Amazon charges long-term storage fees, which can eat into your profits if products don’t sell in a timely manner.


With dropshipping, the inventory risk is minimal. You order a product only when a customer places an order, so you won’t be left with unsold inventory.

Amazon FBA vs. Dropshipping

4. Profit Margins

Amazon FBA

Amazon FBA can offer higher profit margins if your products are sourced cost-effectively and sell well. However, the FBA fees, long-term storage fees, and high competition can affect your profit margins.


Dropshipping typically has lower profit margins due to high competition and low barriers to entry. Additionally, shipping costs can be higher, as products are shipped one at a time. However, the profit can be increased by finding unique products or working with suppliers for better pricing.

5. Scaling Business

Amazon FBA

Amazon’s vast customer base and strong logistics network make scaling relatively easier with FBA. However, more sales mean more inventory, which can present a financial challenge.


Dropshipping allows easy scaling since there’s no need to manage inventory or fulfillment. As you grow, you may need to negotiate better shipping rates or work with multiple suppliers, but these tasks are typically less labor-intensive than managing a physical inventory.

6. Flexibility and Time Commitment

Amazon FBA

Amazon FBA requires time for product research, sourcing, and dealing with Amazon’s rules and regulations. However, Amazon handling storage, packing, and shipping allows you to dedicate more time to these strategic aspects of your business.


Dropshipping allows more flexibility. You can switch suppliers or products with less hassle and cost. However, you need to put more time into customer service, as you are the primary contact for customers.

7. Return and Refund Management

Amazon FBA

In the FBA model, Amazon handles the return and refunds, relieving you from this time-consuming process.


Handling returns can be more challenging in dropshipping. Since you’re the middleman, dealing with customer dissatisfaction and coordinating returns between customers and suppliers can be time-intensive and complex.

Amazon FBA vs. Dropshipping

Best tools for Dropshipping Product Research?

Sell The Trend

AliExpress Dropshipping Center


Dropship Spy

Best tools for Amazon FBA Product Research?

Helium 10

Jungle Scout

Does Amazon Allows Dropshipping?

Amazon permits dropshipping as a business model, but it has strict rules that sellers must follow. Violating these policies can indeed result in an account suspension. Here are the primary rules sellers must adhere to:

1. Be the Seller of Record:

Dropshippers must always be identified as the seller of their products. The packing slips, invoices, and other documentation sent to the customer must identify the seller’s business name and address.

2. Be Responsible for Returns and Customer Service:

As the seller, dropshippers are responsible for accepting and processing customer returns. They must also handle all customer communication and support.

3. No Third-Party Shipment:

You cannot purchase products from another online retailer and have that retailer ship directly to customers. If a customer receives a box with another company’s packing slip (for example, Walmart’s or AliExpress’), it violates Amazon’s policies.

The last point is particularly significant, and it’s the one that makes traditional dropshipping difficult on Amazon. Many dropshippers source products from other online retailers, which is precisely what Amazon’s policies prohibit.

Amazon holds sellers to a high standard in terms of customer service and overall shopping experience. The company seeks to ensure that customers receive their orders on time, the products match their descriptions, and there’s no confusion about where the product is coming from. If a third party is fulfilling orders, Amazon can’t ensure that these standards are met. Therefore, sellers who don’t strictly follow these guidelines can have their selling privileges removed.


Both Amazon FBA vs Dropshipping have their unique strengths and challenges. Your choice between the two should depend on your individual circumstances, including your initial capital, risk tolerance, control over branding, and time commitment.

Amazon FBA is an excellent option if you have capital to invest upfront and wish to leverage Amazon’s vast customer base and logistics network, despite less control over branding. On the other hand, dropshipping may be the ideal choice if you are just starting and have limited capital, or you want more control over branding and customer interactions.

Remember, neither of these models guarantees success. Regardless of the model you choose, success in e-commerce requires quality products, excellent customer service, effective marketing, and constant optimization based on analytics and market trends.

Whether you choose Amazon FBA vs dropshipping, or a different model altogether, the key is to start with a well-researched plan and remain flexible to adapt as you learn more about what works best for your unique business.

Frequently Asked Questions

Is Amazon FBA the same as dropshipping?

No, Amazon FBA and dropshipping are not the same. With Amazon FBA, sellers store their products in Amazon’s warehouses, and Amazon handles fulfillment. In dropshipping, sellers don’t hold inventory; instead, they order products from third-party suppliers to ship directly to customers upon purchase.

What is more profitable than dropshipping?

While dropshipping can be profitable, other models like Amazon FBA, affiliate marketing, and creating and selling digital products often offer higher profit margins and more control over product quality and branding, making them potentially more lucrative for entrepreneurs.

Is Amazon FBA very profitable?

Yes, Amazon FBA can be very profitable due to its vast customer reach and streamlined fulfillment process. However, success depends on product selection, pricing strategy, and managing FBA fees. Proper research and strategy are crucial for maximizing profits.