Is FBA dropshipping? Comparing dropshipping & Amazon

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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