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4. Shopify vs. Amazon FBA: Which Business Model is Right for You?

Shopify vs. Amazon FBA: Which Business Model is Right for You?

Shopify and Fulfillment by Amazon (FBA) are some of the biggest platforms in the world for selling ecommerce products. Choosing the right foundation on which to build your business is usually the first step to reaching your goals, which we will assume is to manage your own ecommerce business.

No matter whether you are a first-time FBA seller or a seasoned veteran in the space, you’ll often hear these two platforms brought up in conversation as the best options. Due to the simplicity that both Shopify and Amazon FBA offer those looking to start selling their own products, this industry has skyrocketed. With this increased popularity, FBA sellers are taking full advantage of amazing valuations, as the demand for acquiring ecommerce brands already generating cash flow continues to grow.

If you’re planning to sell physical products online, the platform you choose will often depict where your business may end up. Shopify allows you the option of building more direct relationships with your customers, while Amazon takes a more basic marketing approach to getting your products before the eyes of your target audience. While both Shopify and Amazon FBA offer great ecommerce solutions, there are some other key differences between them that potential business owners should recognize.

If you’re looking to grow an ecommerce business from the ground up, or shopping on our online marketplace for a new investment opportunity, let’s take a look at Shopify vs. Amazon FBA to help you decide which business model is right for you.

What Is Shopify?

Shopify is an ecommerce platform that gives you the ability to set up your own online store and manage all your ecommerce website functions in one easy-to-use dashboard. When you set up an online storefront, you’re expected to manage your own inventory storage, shipping logistics, payment processing, and more. Shopify provides a user-friendly platform that includes all the optimization tools necessary to manage these operations right from the start.

With Shopify, there’s no need to purchase additional software or make payments to stay current with the latest updates. Everything you need to manage your business will be included as a turnkey package based on the complexity of your brand and selling needs.

Benefits of Using Shopify vs. FBA

• More control. Shopify gives you the ability to have more control over your business by giving you access to your own website.
• Flexibility. With Shopify, you have the flexibility to market the brand and build an email list that you own, which counters Amazon’s terms of service. When you own the customer list, you have far more control over your business, and you’re less at the mercy of the platform, itself, like you are with using Amazon.
• Customization options: There is a range of templates available through the Shopify App Store that give you greater control over how your business pages appear and operate. 
• Multiple payment options. Shopify includes the option to choose which payment gateway to use. It also accepts funds in multiple currencies.
• Customer service. Shopify includes a 24/7 in-house support team that allows you to streamline your own customer service tasks. Shopify also gives your customers a product zoom option and the ability to show other reviews from past customers.
• Fulfillment options. With Shopify, you have more fulfillment options as you can work with third-party logistics (3PL) providers to send products or fulfill these orders yourself in-house. You can also manage everything related to shipping within the dashboard, which adds to the simplicity this platform provides.

Disadvantages of Using Shopify

• Shopify App Store expenses. Shopify may be easy to use, but as you scale and need more functions within your store, add-ons like integration apps may begin to outweigh your cost with managing an Amazon business.
• Learning curve for beginners. If you’re new to ecommerce, you might have a hard time learning how to use the Shopify platform to its full potential. Not knowing how to ship products or which apps (add-ons) you need might confuse some first-time sellers.
• Reach. Unlike Amazon, you’ll need to perform your own marketing and sales campaigns, as you won’t have all your customers on one single platform. It may be more difficult to gain traffic to your products, as you’re building your target audience manually.

Shopify Cost for Sellers

As of this writing, Shopify offers three pricing plans. The cost for each membership monthly fee is between $29 and $299, plus additional transaction fees for each sale. There’s also a free 14-day trial to help you decide whether this is the right option for you and your business goals. Shopify pricing for each membership plan is as follows:

Basic Shopify

Price: $29 per month, plus transaction fees

Transaction fees: 2% on all sales that don’t use the Shopify payment portal, in addition to the standard credit card fees

Included features: Two login accounts, an online store with the option for a blog, unlimited product listings, 24/7 customer support, manual order creation, discount codes, an SSL certificate for your domain, an abandoned cart recovery tool, the ability to print your own shipping labels, built-in fraud analysis tools, point-of-sale (POS) app for local sales, and third-party POS and hardware support.

Shipping discount: Up to 64%

Shopify

Price: $79 per month, plus transaction fees

Transaction fees: 1% on all sales that don’t use Shopify’s payment portal, in addition to any standard credit card fees.

Included features: Five login accounts and everything included in the Basic plan, plus gift card options, professional reports, USPS Priority Mail pricing on qualified shipments, register shifts, and unlimited Shopify point-of-sale PINs.

Shipping discount: Up to 72%

Advanced Shopify

Price: $299 per month, plus transaction fees

Transaction fees: 5% on all sales that don’t use Shopify payment, in addition to credit card fees

Included features: 15 login accounts and everything included in the Shopify plan, plus third-party calculated shipping rates and an advanced report builder.

Shipping discount: Up to 74%

No matter which plan you decide to try, one of the three options above will cover a broad range of business sizes. If you find that none of the options mentioned above seem to fit your specific needs, you may want to consider a custom solution called Shopify Plus, a tailored solution geared toward larger organizations and enterprises.

What Is Amazon?

You may already be familiar with how much Amazon has grown over the past few years, but did you know that more than half of the products sold on Amazon’s marketplace today come from third-party sellers? It’s no surprise that many newcomers to the online business space are choosing Amazon as their preferred platform based on the sheer volume of traffic the platform receives every day.

Benefits of Using Amazon

• Scalability. Amazon is much easier to scale, as most of the logistics, marketing, and customer service aspects of the business are taken care of for you.
• Trust factor. Because Amazon is one of the most popular websites to use in the world, you already have a given trust factor that your customers maintain.
• Easy-to-use platform. For FBA sellers, having a library of useful resources within your Amazon Seller Central account means it’s much easier to get started and sell based on what’s needed for the product listing pages, themselves.
• Repeat customers. Because Amazon manages marketing for your products (outside of using PPC ads), it’s much easier to gain repeat customers.
• Access to Amazon Prime. Customers who pay a monthly subscription fee for Amazon Prime can get your products delivered rapidly. A happy customer base leads to higher ratings and more sales. 

Disadvantages of Amazon

• Competition. Because there are so many Amazon third-party sellers, competition is fierce. The more sellers offering products like yours mean you’ll need to be unique in what you offer by gaining a trademark or patent to stand out from the rest.
• No custom branding. Because your product listings live on Amazon’s platform, you can’t add any retailer customization to the listing page, itself. Having minimal control of your products listing page also opens the door for customers to discover your competitors’ products (often displayed as suggestions or “similar” items your customer might want to consider).
• Terms of service. When your product pages live in the Amazon ecosystem, you’re held accountable for following their terms of service agreements. Often, some FBA sellers will run into problems where they unknowingly breach the terms of service rules and have their listings taken down. This can easily be avoided, but shows that your product listings are at the mercy of Amazon.

Amazon’s Fees for Sellers

The cost of selling your products on Amazon depends on whether you want to ship items yourself or have Amazon fulfill orders for you. If you’re fulfilling your own orders, you can sell as an individual or a professional.

Fulfillment Fees for Individual sellers

Cost: 99 cents per sale, plus referral percentages

Included features: Option to add new items to the Amazon catalog for fulfillment by Amazon

Professional plan

Cost: $39.99 per month, plus referral percentages

Included features: Everything included in the individual seller’s option, plus the ability to sell products throughout North America, bulk listing and ecommerce tools, custom shipping rates, the ability to offer promotions to increase your Amazon sales, and top placement on product pages within your category.

How much Amazon charges for referral fees depends on your brand’s product category. For example, the books category is 15% of the sales price, and for the electronics category, it is 8%, or a 30-cent minimum fee. Make sure you read our last post on the Amazon commission updates that rolled out in 2020 to get a better idea of what these numbers will look like for you, depending on the category of products you’re selling.

If you don’t plan on shipping products in-house, you can also pay for the option to have Amazon fulfill your orders for you. This means that your inventory will be kept at an Amazon warehouse, and Amazon will handle all your logistics. When you choose to have Amazon manage and ship your products, you pay a per-unit shipping fee on every order plus a warehousing fee per cubic foot of product stored within their fulfillment centers.

Shopify vs. Amazon: Our Final Verdict

While choosing the best ecommerce platform to build your business on can be a daunting task, understanding what your business goals are before you decide will help you make the right choice based on your needs. A few main takeaways from this guide to consider when choosing which platform is right for you include:

• Amazon FBA is much easier to scale but has a bigger critical point of failure (Amazon themselves)
• Shopify gives you more control, but it is also more difficult to start from the ground up, as you must learn everything about the platform as you go.
• A scaled-up Shopify store will have a better ability to pivot into the Amazon FBA ecosystem compared to a scaled-up FBA business that won’t have as much leverage to expand into a Shopify distribution channel (because you don’t own the customer list)
• Both are great ecommerce solutions and, when possible, should be used in tandem

The biggest piece of advice we give our readers when it comes to growing an online business (no matter which monetization you’re in) is to diversify as much as possible. Traffic, sales channels, marketing platforms—everything should be diversified as much as possible to avoid placing all your eggs in one basket. The more diversified your business, the less likely you’ll reach a point of failure by relying on one source of traffic or sales that suddenly drops off with no warning.

In fact, you’re not just limited to FBA, Shopify, or any other ecommerce platform. Leveraging multiple platforms can help you get your products in front of the widest audience possible.

You can use a range of automations to sync Shopify with FBA, redirect your listings to a single platform for sales, or simply take advantage of multichannel fulfillment. But the bottom line is, you’re not solely limited to Shopify/FBA platforms. 

The more diversified you are in multichannel selling, the bigger your safety net around the business becomes. Acquiring an established ecommerce store is also a great opportunity for those looking to skip the start-up pains, as you can use the assets’ existing data to build out your growth strategy. If you’re seeking an ecommerce business that features a well-diversified portfolio of products spread across multiple platforms, head over to our marketplace to discover new business opportunities released every Monday.

Still on the fence about Amazon FBA vs Shopify? Want to fast-track the start-up time and acquire an ecommerce business already generating steady cash flow? Schedule a call with one of our business experts today, and they’ll gather a criteria list based on your individual business needs.

If you already own an FBA business, learning about the best practices when it comes to selling can help you to maximize your sale price and get a deal done quicker. Take a look at our blog post about selling your Amazon FBA business.