(this means less stress, shipping issues & customer service) 🎯
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1. DROPSHIPPING
You've heard of dropshipping.
Instead of manufacturing and shipping products yourself, you act as the 'middle man'
You do the marketing, connecting customers with the manufacturer.
There are pros and cons to this business model.
✅ Pros:
- no inventory
- no shipping for you
- low startup costs
- you only need a website + traffic
- mostly low-risk
🚫Cons:
- low margins (which means breaking even on advertising is hard, difficult to scale, etc.)
- heavy competition
- generating traffic can be difficult
- no control over fulfillment
- customer service is necessary
All in all,
Dropshipping is a great entryway into eCommerce.
2. 3PL
3PL = 3rd party logistics companies handle the storage of your products & deal with order fulfillment.
Using a 3PL for your online store gives you more control than dropshipping,
BUT you still don't need to worry about inventory + fulfillment.
Here's how this works:
- You ship all of your products to the 3PL provider
- A customer places an order on your website
- Your website sends the order to the 3PL
- The 3PL ships the order to the end customer.
- You pay the 3PL a monthly fee PLUS a per order cost for fulfillment
✅ Pros:
- You don’t have to store any inventory or ship out orders yourself.
- You have full control over your customer flow.
- Your margins are usually 50% or higher which gives you more flexibility on advertising
🚫 Cons:
- You have to purchase your goods upfront
- You are responsible for driving traffic to your own website
If you want a more traditional online store (compared to dropshipping) but don't want to worry about inventory or fulfillment?
Using 3PL is a good option for you.
Amazon FBA
You've likely heard of this business model.
Here's how it works:
- You ship your goods to Amazon’s warehouse
- You list your products on Amazon marketplace
- A customer places an order on Amazon
- Amazon handles storage, fulfillment + all of your customer support
✅Pros:
- Once you ship your products to Amazon, you don’t have to do anything else. Amazon takes care of sales, shipping, returns AND customer service
- Amazon’s marketplace is so large that you will likely generate sales right away
🚫Cons:
- Amazon takes 15% of your revenues + 10-15% for fulfillment
- You have to purchase your products upfront
- You have to obey Amazon’s rules
- You get paid once a month (and Amazon can hold your $$ for any reason)
- Heavy competition
- Amazon can ban you at any time
Overall?
Amazon is king, which means you can make tons of money selling there.
It's up to you whether you're ready to deal with the competition and Amazon' draconian rules.
Final Words:
Dropshipping is getting harder to execute.
I suggest:
>3PL
>Amazon FBA
If I had to recommend one?
Amazon FBA.
All that said,
Your goal should be to create your own branded business.