Is FBA dropshipping?
Hey, it's Beau Crabill here
I'm back with my books
And I'm answering the question, is Amazon FBA dropshipping?
The short answer is no, it is not
Let's take for example, this lamp
If I wanted to go buy this product from wholesalers
which would be the best way to do, getting the best cost
And I send it to Amazon to do their FBA services
which means Amazon does the shipping
Amazon does the packaging, the warehousing
and I'm able to utilize their employees and their customer service
I'm then gonna get a Prime sticker on this lamp
It's now gonna get sent off to the customer when they buy it
That's FBA
Now people think that, oh, private label is FBA
No, private label's a process, a business model
And FBA's a fulfillment channel
On Amazon, there's FBA and FBM
FBA is where Amazon, again, does the shipping
they do the customer service, they do the warehousing, everything
FBM is where it's fulfilled by merchant
meaning Amazon's not shipping it out
You can sell it on Amazon, but you are doing the shipping
Dropshipping is a form of FBM
Is FBM dropshipping? No
Just like how private label's not an FBA
You can do private label and do FBM
Like I do wholesale on Amazon, and I do it FBA and FBM
So if dropshipping is not FBA, it's not Amazon FBA
and it's technically, it's a form of FBM
Why do people do dropshipping
and what are the pros and cons about it?
Well, the pros about it, if you do dropshipping, right?
You would sell this lamp
So you would sell it on Amazon
you put it on your own site, put it on eBay
And when it's sold, you then ship this lamp to your customer
Now, where you got this from
'cause you wouldn't put any money up front
So that's the pro, you don't put any money up front
However, the con of it, is you're doing FBM
And to be winning the thing called the buy box
So if I wanna go sell this on Amazon
and if I wanna get the most amount of sales
I need to win the buy box
The buy box is simply the add to cart section
You can call it the front isle of your grocery store
where most of the sales happen
I need to, as an FBM seller, which, I do FBM as well
There's money to be made with it, I don't dropship
I don't dropship at all
I would need to be 15.1% lower than the next FBA price
And then you need to have a fast shipping time
and good customer reviews
Doing FBA, I can be 15% higher than the lowest FBM price
I don't need any seller reviews
I don't have to worry about shipping 'cause Amazon does it
So let's do the math here
you automatically lose out of 15%
Typically, the cost for you shipping it
'cause you are a newbie
you don't know how to ship cheap like me when I'm doing FBM
So you're out 15%
But then, you also have a higher cost
This is a really funny story, my shipping guy
So we ship out products every single day
I don't, I don't handle that work
I hire employees to do it for me
They sent me a little picture
It said, hey Beau, look
We got some dropshippers buying our inventory
So we're selling all these like Hot Wheels
and these toys, and video games, and consoles, electronics
And we got tons of these messages off this one product saying
hey, can you not put the packing slip in the shipment?
Can you just leave it blank? Just put a blank packing slip
You know, don't say where it's coming from
don't put your address
and you know, don't use an Amazon box
I'm like, that's a dropshipper
So, the reason why they're doing that
So let's think about that
they're dropshipping on either their website or most likely eBay
And their source of inventory, their supplier, is me
who's buying at wholesale, selling for more
I'm telling you right now
I was making 200% return on investment on that product
So I'm marking up 200%
And that person's hoping to go make a margin on eBay
where then eBay charges them fees, all that stuff
So obviously, they made money off of it
Maybe, I think, 'cause they bought it from me
But you could do a lot better when buying at wholesale
So, that's one issue with dropshipping, it's a con
Second issue, it's against the Terms of Service
eBay will not say it's against the Terms of Service yet
but they're getting cracked out on a bunch
Amazon literally says it's against the Terms of Service
Unless you do the model that I do
when I'm buying from distributors
That I have my suppliers do the dropshipping
That's actually allowed
But when you're doing it from Walmart, Target, Macy's, all that jazz
Yeah, it's not gonna work
You know, there's these like Amazon automation people
that like sell all this stuff
And now, I hear they're selling like wholesale FBA dropshipping
When in reality, they're actually doing FBM
So to recap this video: dropshipping is not FBA
Dropshipping is a form of FBM
FBM does not mean dropshipping
it is just form where the merchant is fulfilling it
FBA is fulfillment by Amazon, where Amazon is doing the shipping
Let me know if you have any questions at all
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