Which is better, dropshipping with Aliexpress or private labelling and selling on the Amazon FBA program? I am going to answer which one of the models make the most money. But I’m also going to compare them when it comes to other important points as well, such as which is the cheapest for newbies to get started with and which one is the most passive?
So let’s jump straight into it.
1. Which is the cheapest to get started?
To get started with dropshipping, you’re going to need the following things:
- Products to sell
- An on online store
- Money for advertising.
All right, because of the fact that you’re dropshipping, you don’t need to purchase any items in advance, because you only purchase items that customers have already bought from you. Usually, you’ll be selling items that cost less than $10 to fulfil, so you would need very little startup money.
Now, let’s move on to starting an online store. When it comes to this, you’ve got two options.
Starting a Shopify Store
Firstly, you can start a Shopify store. This is usually what I recommend for beginners because it’s super easy to use. Shopify costs just $29 a month, and there is a free app, Spocket which helps you automate the dropshipping process.
Of course, if $29 a month is too expensive, then you could start a WooCommerce store. And you will need one final thing, money for advertising. Just to be clear, this is optional. You could be using a free traffic method like SEO or building up a Facebook fan page, but I suspect that most of my subscribers here plan to be using paid traffic. If you do that, you’ll be running short one-week ads for the products that you are testing. You run the ad and see if it’s breaking even or making a small profit, and if it is, you scale up from there. Yes, this costs money, but you can start with tiny ad budgets, as low as $3 a day. This means it can cost as little as $21 to test a product.
While you’re testing the product, you will make sales, even from products that aren’t’ breaking even. You can then take that money and reinvest it until you find a winning product. You can do this gradually even if you don’t have that much money to get started. That means then that if you’ve got, say, a weekly budget of $50, then you can test two to three products a week.
Starting Amazon FBA
Now, let’s compare that with private labelling with Amazon FBA. Immediately, you’re going to need to order stock in inventory. And the chances are, you’re probably going to need at least 200 units.
Ideally, you’ll be running a launch marketing campaign where you’ll be giving away products using coupon codes, and also using paid traffic to drive fast sales. Ultimately, you can be looking at easily a thousand dollars to get started with Amazon FBA. So I think that we have a clear winner in this case.
And the winner is dropshipping!
2. Which business model is the most passive?
Okay, when it comes to dropshipping, you’re going to need to do many things to keep your business running. Firstly, every day, you’re going to need to check to see if you’ve made any sales. Next, you’re going to have actually to fulfil those sales. With apps like Spocket, you can greatly streamline the process, but at the end of the day, you’re still going to need to fulfill the sales.
When I say “fulfil the sale,” I mean you’re going to need to order the item from the Aliexpress seller, and then get it shipped to your customer. You’re also going to need to be watching your email inbox and answering questions from customers. You need to be staying on top of your customer support. Also, you’re probably going to be running ads on Facebook, so you need to be monitoring those and adding new ones as well.
Once you’ve got an established store, you can certainly hire a VA (virtual assistant) to help you with these tasks and to make it more passive. But until then, yes, this is a hands-on business model.
Now, let’s turn to Amazon FBA. Once you find your product, manufacture it, ship it into the Amazon FBA warehouse, and run your launch promotion, there isn’t a lot more that you need to do. The work for private labelling is upfront. You do your research, you manufacture your products, you run your launch promotion, and from then on out, it’s quite hands-off.
Well, this is for two reasons.
- Amazon handles fulfilment for you: When it comes to dropshipping, it’s up to you to watch for orders and the to fulfil the order for your customer. But when you sell using the FBA program, Amazon takes care of all of that for you. They store the items in their warehouse. And when a customer orders it from them, they go find it and then ship it out to them. All the while, you do nothing.
- Amazon handles the marketing for you: If you run a good launch promotion, then you should be sitting at the top of the Amazon search results for the keywords that you were targeting. And every day, people would be coming to Amazon, searching for your keywords, finding your item, and then buying it, all the while, you don’t have to do anything. The most important thing that you need to be doing as an Amazon FBA seller is watching your inventory levels and making sure that they are healthy. But all that day-to-day, hands-on stuff, well, you can let Amazon do that for you.
So again, I think in this case here; we have a clear winner.
And the winner is Amazon private labelling!
With dropshipping, you can sell and test many products without having to wait to manufacture inventory. And if you find a winning product, it can earn you tens of thousands of dollars a month. That means that if you get really efficient, and build your VA team, then you can legitimately scale to over a million dollars in a single year.
With dropshipping, you have the big advantage that people are coming to your personal store. What this means is that you have power over what is happening to the customers since they are coming to your site that you control. Which means that you can add upsells to your products, which greatly increases the amount of money that you make per order.
And you can have Facebook pixels to your website, so that you can catch the customers who are more retargeting on Facebook. And of course, you are collecting their email addresses for further remarketing.
Now let’s turn around and look at private labelling with Amazon. Obviously, there’s a lot of money to be made. But let’s be honest, scaling is not going to be as fast. You can’t immediately sell products. You need to manufacture them, private label them, and then ship them into the Amazon warehouse. Plus, because you’re selling them to Amazon’s site and not your own, you don’t have control over what items Amazon upsells them on, because Amazon most certainly upsells to customer on more products, but they get to choose what the products are, and oftentimes, they’re not going to be yours. They’re going to be your competitors. Plus, you have strict limitations over how you’re allowed to email your existing customers. And obviously, you don’t get to pixel them either.
So if you haven’t already guessed,
and the winner is dropshipping!
4. Which business model has the least risk?
Here’s the thing with dropshipping. The key is to test different products with ads and see which ones connect and which ones don’t. Now, unfortunately, most products won’t connect. You’re going to have to test a lot of different products before you find winning ones.
The average that I’ve noticed to the industry is that you tend to test about 20 products to find 1 winning item. But that is just an average. You might be super-duper lucky and find that your first item is a winner. Or it might take you 50 products to find a winner. There is no way to know.
Now, let’s look at Amazon FBA. If you’re doing that right, you are not testing lots of different products to find a winning item. Instead, you have access to a huge bank of data so that you can immediately spot a winner.
Using Jungle Scout, you can see how many sales are being made for similar items every month. And you can see if itemless [SP] things that are poorly optimized are still making sales. And with that data, you can then go find an item that is making lots of sales even for competitors which have product listings that are poorly optimized. You can then private label, manufacture it, and then optimize your product listing so that it’s better than the competition’s, and sell.
If you claim your two-week Amazon launch strategy right, then you are following a proven formula for rising to the top of the Amazon search engine results for the keywords that you are targeting. And then you will make organic sales. With private labelling, there is no guesswork. Using data, you pick your winning product and then using data, you launch your product following a proven formula, and then you make your money.
So with this in mind, I think we once again have a clear winner.
And the winner is Amazon private labelling.
5. Which is best for free traffic?
Usually, when you’re getting free traffic, you’re getting it from search engines. So what is a search engine? Well, the best example of a search engine is Google. You go to Google, you type in the name of an item that you’re looking for, and then Google will give you a list of pages that it thinks best matches what you are searching for.
For example, if you come to Google and type in “Ron Weasley Magic Wand”
If you scroll down, you’ll find that their store is listed on the first page of results. Because the store is ranking for keywords like that, it means that they are getting free sales from people coming to Google, typing in an item, and then finding their store.
But here is the thing about ranking for keywords in Google. It is slow. It can take weeks, even months, for Google to move your website up the search results. Even though you can get free traffic to an Aliexpress dropshipping store, it isn’t something that I would recommend.
Now, let’s compare this to private labelling on Amazon. Well, honestly, there is no comparison. Private labelling rocks when it comes to free traffic. You see, when you sell at Amazon, you have access to another search engine, and that is the search engine on Amazon’s site. In fact, on Amazon, roughly 90% sales come from organic traffic, and just 10% sales come from the paid ads that you can purchase on Amazon’s site.
So if you are doing the private label business right, then it will be built upon the idea of creating a product listing which sits at the top of Amazon search results. So let’s say you did your research and you discovered that for some reason, there was a huge opportunity to sell aluminium water bottles on Amazon. Your goal would be to create your listing so that when people type aluminium water bottle into the Amazon search engine, your product appears on the first page of results. And luckily, unlike the Google search engine, manipulating the Amazon search engine is really easy”
And the winner is Amazon private labelling.
6. Which is best for paid traffic?
Okay, so the winner for this one is pretty obvious, to be honest, so I’m going to keep it short. With dropshipping, you get to take full advantage of paid traffic. You can test lots of products and find super winning items, and importantly, you can get those ads running up within days if you wanted to.
Well, because you don’t have to wait a month to manufacture products and then ship them into the Amazon FBA warehouse. Now, with Amazon, it’s very different. Of course, if you’ve got a successful product listing, then it is a fantastic idea to run paid traffic to it. But that’s it. You’ve got one product. And if you want to run more, then you’re going to need to have to go, find a new product, manufacture it, ship it into the Amazon FBA warehouse, and then you get to run ads for it.
So if you like working with paid ads and traffic, then there is no contest. And the winner is clearly dropshipping.
That’s it, folks. It looks like we have a tie. Who would have guessed that there’s no right or wrong choice here? You need to pick the right business model that suits you. Comment below and let me know which business model that you prefer. Thanks for reading this article.
Muammer is a Marketing Analytics Manager at Turkcell. His mission is to empower entrepreneurs and to help them achieve their goals. He also has a passion for illustration.