FBA, or Fulfilled By Amazon, is a system in which you use Amazon’s services as the biggest ecommerce store in the world, to warehouse and ship your products to their customers who have used their site to purchase your item.
Running an ecommerce store is similar in a way but you are responsible for running the site and patent platform as well as figuring out your own shipping. It seems like FBA would be better for a budding entrepreneur then.
Well, there are pros and cons to both scenarios and it pays to know what they are so you can make a determination for yourself as to which one is best.
In this article, I will go over what you need to know about both so you can decide.
The biggest benefit to running your own ecommerce store is being in control of the payments. You are free to decide which payment methods you want to accept. This can include Paypal, credit and debit cards or even bitcoin. Yes, even cryptocurrency is an option as long as your customers use it or know where to buy BTC, you can accept it on your site.
With Amazon, you are limited to how they accept payments which is only with credit or debit cards. This works great for Amazon as they like to keep it simple. But, for your own store, it makes sense to have many different options for your customers which makes it easy for them to make a purchase.
Hands off or hands on
How much of the operation you want to be responsible for is going to determine which method is right for you. With FBA, you are almost entirely hands off if you want to be. You can order your products from the factory, have it shipped directly to Amazon’s warehouses and let them do the shipping for you. At no point of the process do you need to handle the product or make any kind of decisions about it after it’s been sent to their warehouse aside from how much to charge.
When you run your own ecommerce store, you may be more involved which could even include the handling of the incoming orders and shipping yourself. Of course, there are fulfillment companies that can handle warehousing and shipping your orders if you want, but this is a more complicated system to set up.
Having your own ecommerce store means you are in direct contact with the customer and are responsible for keeping them happy. With FBA you are not involved in the process at all, so Amazon is responsible for taking care of returns or unhappy customers themselves.
The benefit to being more involved, however, is that you can actually do more to make sure the customer is happy and keep them returning to you after.
As you would imagine, having Amazon take care of the process comes at a price. There are a lot of fees involved that will take a big chunk of your margins that you have little control over. And since many people expect Amazon to have the lowest prices, you are forced to operate on very slim marins since you need to keep your prices low.
When you have an ecommerce store there are fees as well. The payment processing, any shipping fees and more are your responsibility. However, you generally are able to incorporate these fees into your pricing better and end up with higher margins.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.