Shopify vs Amazon FBA: Pros and Cons
For sellers that are new to ecommerce, selecting a platform will be one of the key determining factors in the success of your business. Many people who are new to ecommerce are inspired by seeing the results of someone who has posted their business metrics like revenue and products.
Rather than following a “guru” blindly, it’s important to assess the possible platforms that you may sell on to choose which platform best suits your needs and will maximize the odds of success. Amazon FBA and Shopify are two of the largest platforms for people that are looking to get started on ecommerce. Below we will explore the pros and cons for each platform and you can decide which is best for you.
Shopify is an ecommerce platform that enables sellers to create online stores. Instead of marketplaces like eBay or Amazon, Shopify enables sellers to create and grow their own business with a variety of software tools that can help with marketing, operations and more.
With a lot of the infrastructure already built in, sellers don’t need to worry about writing code or doing any of the technical heavy lifting. It has end-to-end products, so sellers don’t have to worry about payment, shipping, etc. Many sellers have built sustainable brands and stores on Shopify.
Customization: Shopify has endless options for themes and templates for building stores. Sellers can make their store look as they want and don’t have to conform to looking like other sellers on marketplaces. This allows sellers to build a brand and they don’t have to compete with rival sellers on the same site.
Once a Shopify brand is established, it can turn into passive income for sellers for a long period of time. The ability to customize is crucial when building a brand for a product and Shopify enables sellers to use all tools at their disposal.
Dropshipping: For many years Amazon has banned dropshipping and has recently started getting looser with their guidelines. In contrast, Shopify has encouraged dropshipping from day one and enables sellers to dropship with their different apps and programs.
Dropshipping is a business process where sellers can list items without having them and once the buyer purchases it, the seller orders from a supplier that sends the order to the customer’s address. This allows sellers with low capital to start selling and use the money the customer provides them to order a product and keep the profit.
Shopify enables sellers to dropship by giving them all the tools they need to fulfill their dropshipping orders. This allows Shopify sellers to have very low overhead and make money anywhere in the world.
Shopify app store: For any need a seller can have while selling on Shopify, Shopify has an app for it. Need reviews for your site? There’s an app for that. Want to add email marketing to your store? There’s an app for that too. App integration is one of the most powerful tools for sellers on Shopify. When you think of online stores like underarmour.com or footlocker.com, you think of a very polished site that has a ton of features.
With the Shopify app store, you can literally add any functionality or feature to your site and improve your branding and design significantly. This allows you to have a beautiful online store and all you need to focus on is customer acquisition and other marketing efforts.
No free plan: When you start selling on Amazon, you have the option to choose the individual plan that’s free to start. Shopify only provides a two-week trial to build your store and check out how the platform works. Once the two weeks are done, you can’t work on the site or make any sales until you sign up for one of their plans.
The lowest plan is the Basic Shopify plan and it costs $29/month. That plan allows you to create an online store and get access to most of the features available. The only other fee associated with the basic plan is Shopify takes a small cut (2.9%) of each sale.
Little subscriptions can pile up: Since Shopify provides the general outline for your store, it’s your responsibility to make sure your store has all of the features and functionalities your customers need. This will eventually lead you to signing up for many premium apps and products and that will eat into your margins in addition to your Shopify subscriptions.
On Amazon, the fees that you accumulate are relative to your sales. You won’t have high FBA fees and fulfillment costs if you’re not making significant sales. The subscriptions are a con assuming that you’re going to make a great Shopify store with everything that the average customer expects due to their experience with buying on Amazon, Walmart, etc.
Migration is difficult: In the future, if you choose to move on from Shopify for some reason, your store won’t just come with you easily. Since your store is built on Shopify, there aren’t a ton of data points you can take with you to make a migration easy to another platform.
If you do decide to move on from Shopify, you will likely need to make an extensive checklist to ensure you keep your URL redirects, take your blog posts with you and find a way to migrate customer credentials like their usernames and passwords for your site. You can use a password manager to help with migrating your credentials.
Access to hundreds of millions of customers: Ecommerce customers don’t grow on trees, but if they did they grow at Amazon.com. Imagine if Walmart, Target or another retailer gave you access to their customers. The fact that literally anyone can create a seller account and automatically have thousands if not millions of eyes on their product is crazy. Amazon has solved a huge problem for business owners: demand. All sellers have to do is find profitable items and send them into Amazon and the rest is taken care of.
When you send a product to a warehouse, it is eligible to be a prime product. This gives you access to loyal Amazon customers that prefer convenience and don’t mind a product that is a little more expensive to get it faster. This is a huge factor in the sales pipeline for Amazon sellers. If you want to attract sellers to a Shopify store, you must advertise and that is definitely not free.
Shipping convenience: With shipping, Amazon has already done the heavy lifting and negotiated extremely low rates with shipping providers like FedEx, UPS and USPS. When you ship a product to an Amazon warehouse, Amazon provides you with all of the labels and you just need to place it on the box and send it to Amazon. More importantly, Amazon FBA provides shipping convenience for the customer.
With two-day shipping in virtually every city in the U.S., Amazon ensures your product reaches the customer within two days. This seamless shipping experience enables you to get repeat customers and increase sales tremendously.
Customer service: Last, but certainly not least, Amazon provides the best customer service in the world. That’s not an exaggeration, it’s a fact. For many years, Amazon has been the most trusted brand by customers because they have fulfilled their promise to be the world’s most customer-centric company. Whenever there’s an issue with a product, Amazon will handle complaints, returns and everything else in between.
If you have a Shopify store, all of the customer service will be done by you. For Amazon sellers, they have the infrastructure of the Amazon customer service team and they handle all issues. This allows sellers to focus on growing their business instead of focusing on managing customer support all day.
Branding/autonomy: As an Amazon seller, one thing you must understand is that the customers on the platform belong to Amazon. As a seller, you are a partner with an Amazon because you provide products that Amazon does not have in stock and Amazon provides a willing buyer.
All of the regulations on Amazon are to protect the Amazon customer. If you violate those regulations, you will likely have your account suspended. On Shopify, if you get a lot of negative reviews, you still maintain your site. If you do that on Amazon repeatedly, you’ll likely get your account suspended or permanently banned.
Also if you build a branded product on Amazon, you cannot link to an external site (like your website) on Amazon. This is strictly prohibited, so you can’t build a brand off of Amazon’s customers then take the customers with you to a new site. Everything you build on Amazon’s platform is regulated and controlled by Amazon to a certain extent.
Storage fees: Storage fees are a huge disadvantage to Amazon if you send in a lot of slow moving products. Most sellers on Amazon have a good idea of how demand for products work, so this isn’t a major issue. The problem occurs when you send in a lot of products and a big portion sit at an Amazon warehouse for months. This will result in a lot of fees and you can end up losing money on your product.
Competition: Competition on Amazon is fierce because you are competing with a lot of sellers in addition to Amazon occasionally. If you are competing with sellers, they can run out of inventory and your product will be first in line. In contrast, if Amazon is on the same listing as you, don’t even try to compete. They always have the lowest price point and trying to compete with them will end up in you losing a lot of money. Competition by itself isn’t a terrible thing because the demand on Amazon is great, but you need to be able to gauge how much competition for a product is good before you buy it and send it in to Amazon.
That covers the major pros and cons affiliated with selling on both Shopify and Amazon. Both of the platforms have their advantages and disadvantages, but I would recommend trying Amazon if you’re a new seller. This is because in order to succeed on Shopify, you must use ads and that is another skill set you will have to learn. Most of the successful Shopify sellers use Facebook Ads to drive traffic to their site.
A new seller will have to learn how to use Shopify, build the site, pay for a Shopify plan, learn Facebook ads before seeing any meaningful progress in their store. It’s much easier to just sign up for an Amazon seller account, find some cheap or free products around you and ship them into Amazon. Once you make sales, you can use that money to buy more products and grow your business. Amazon FBA is the more cost-effective option for the majority of new sellers.