Shopify vs Amazon – Which platform is best in 2021?
So you want to start an online business selling…something. Maybe you have a product in mind or perhaps you’re still researching what you should sell. Regardless of what you decide to sell, when it comes time to sell that item, how are you going to do it? What are the benefits and downsides of selling on Shopify vs Amazon?
Odds are you found this article because you want to know the differences between selling via a Shopify store and selling on Amazon. There are a number of factors to consider and I’m going to break them down below. While it may seem like they are similar, you’ll be surprised at the unique benefits each possesses.
Table of Contents
What is Shopify?
Simply put, Shopify is a service that allows you to host your own online storefront. You can create a website that features whatever products you choose, and Shopify provides you with a way for customers to add items to their cart, and checkout with various payment methods.
Creating a Shopify store can be fairly straightforward and their services will help you at each step, all the way down to registering your domain name and hosting your website.
Methods of selling on Shopify
Shopify can be used in a number of ways, but for the purposes of this comparison, we are going to focus on two specific scenarios.
Dropshipping
Firstly there is dropshipping. Dropshipping is way to sell online without ever having to own or manage any inventory.
The way it works is you list one or more products on your website, and when someone buys something, you place an order with the manufacturer and enter the customer’s shipping details. This way you have the payment up front, and you keep any profit after you order the item.
You never have to actually handle any products! Sounds pretty sweet!
Selling your own products
Another way to use Shopify is to sell your own products. This differs from dropshipping because you need to purchase the inventory ahead of time, you will need to store it somewhere, and you’ll need to ship each item out whenever someone buys one.
This method requires more upfront capital, but allows you more control over the product as you’ll be in charge of creating it, rather than simply ordering something that already exists. You’ll be able to add your own branding to distinguish your product. If sold via dropshipping, there’s nothing stopping another seller from selling the exact same item you did.
What is Amazon?
I’m sure you know what Amazon is, but to quickly sum it up, Amazon is the largest online marketplace in the world. Anyone with a product can sell it on the Amazon platform to a vast audience of potential customers.
Amazon gives you the opportunity to sell your own products or re-sell products that already exist. With Amazon being the world leader in ecommerce, you already have an immense audience of people who are looking to buy!
Methods of selling on Amazon
Similar to Shopify, Amazon can be used in a number of ways, but again for the purposes of this article, I am going to focus on just two.
Fulfilled by Merchant
Fulfilled by Merchant (or FBM) is similar to selling your own products on Shopify. You create your own listing on Amazon, and when someone places an order, you are notified and you ship them the product. You pay a referral fee to Amazon for using their services in exchange for acquiring this sale.
Fulfilled by Amazon
Fulfilled by Amazon (or FBA) is likely the term you’ve heard much more about. FBA is where you sell your own products on Amazon, but you leverage Amazon’s network and services to handle much of the process.
With FBA, you send your products to the Amazon warehouses, where they are stored until someone buys them. When an order is placed, Amazon will pick and pack the item and ship it to the customer. You are completely hands off for this process, but it does come at a higher fee.
In exchange for Amazon handling all of this, Amazon takes a larger cut per sale compared to an FBM sale.
Pros and Cons of Shopify vs Amazon
Pros of Shopify
You have more control: When selling a product on Shopify, you’re running your own site so you get to play by your own rules. There are no guidelines you need to follow to make it an even playing field for all sellers.
Lower fees: When you make a sale on Shopfiy, you will pay 2.9% + $0.30 per transaction. This is much lower than what you can expect to pay when selling on Amazon, but we’ll explore that more below.
Build your own storefront: With Shopify, you’re running your own website, so the sky is the limit when it comes to creativity. You can design your store to look any way you want!
Cons of Shopify
Responsible for traffic: This is easily the biggest downside to selling on Shopify. Since nobody knows about your new site, you must find a way to get people to visit it. Getting the correct traffic to your site will be one of your biggest challenges.
Marketing: Again, since this is your own site, you will be responsible for all of the marketing to drive the aforementioned traffic. You’ll need to create compelling ads and show them to the correct audience who will want to click on it to visit your site and ultimately buy your product(s).
Customer Service/Returns: When a customer is unhappy with your product, you’re going to hear about it. When selling on Shopify, you’re on your own to handle any customer service issues. If you get a bunch, then you’re going to be spending a lot of time answering emails.
You also need to have a system in place for returns. If a customer wants a refund, where will they ship their product back to? Will you give out your home address or set up a PO Box?
Manage & Ship Inventory: Unless you go with the dropshipping route, you will need to store all the inventory somewhere. When orders come in, you will need to package up each one, write out a label, and get the packages shipped off. This can be very time consuming once orders ramp up.
Fees can add up: While the per-transaction fee imposed by Shopify is relatively low, there are other fees you will likely incur when running your website. For instance, there are countless apps you can buy to encourage conversions on your site. The ones that have proven to be effective usually aren’t free. If you opt for multiple of these apps, the monthly fee can start to add up.
Pros of Amazon
Leveraging traffic: This is one of the biggest benefits of selling on Amazon. Not only do they already have an enormous user base, but they people who are there with the intention to buy stuff. They came to Amazon because they are looking for something, so you don’t need to drive outside traffic to sell products!
Prime shipping: If you opt to use the FBA model of selling, then you will get to take advantage of Amazon’s Prime shipping, offering 2-day shipping on most orders. This is a huge leg up as most people don’t want to wait weeks for their order to arrive.
Customer service and returns: Another huge benefit is that you don’t have to deal with customer service or returns. If someone wants a refund, they reach out to Amazon their customer service team will handle it. Unless the customer reaches out to you directly with a question, you won’t need to be answering many emails with order issues.
Cons of Amazon
FBA fees: Don’t think you get all those perks for nothing. Those services come at a cost. When you sell an item on Amazon, you can expect to pay 15% of the sale price + a referral fee. You’ll need to make sure you have the margins to support this.
More competition: When something sounds great, you can bet you’ll find others trying to capitalize on it too. There are a LOT of sellers on Amazon. When you list your products, you need to ensure your offer stands out and crushes everyone else if you want to be profitable in the long run.
Long-term storage fees: Amazon doesn’t like it when inventory sits idle. You will need to make sure you are constantly turning over your stock or you’ll get hit with long-term storage fees. The longer your inventory sits there waiting to be sold, the more expensive it will get!
How much does Shopify Cost?
If you look up how much it costs to start a Shopify store, you will likely see people say “Get started for $29.99” which is the monthly cost of having a basic Shopify store. However, odds are that you will end up paying for either a theme and/or apps to help convert shoppers to customers.
Additionally when it comes to running a Shopify store, you are responsible for getting traffic to your site. Just because you have launched a site doesn’t mean people are going to find it.
You need to drive traffic to your website. But how?
You will need to run ads promoting your product to get people to visit your website. This can be done for free via social media, but you’ll need an existing audience for this to work. Alternatively you can drive traffic via Facebook ads and influencer marketing, but keep in mind that these will drive up your costs.
How much does Amazon Cost?
When it comes to selling on Amazon, you have two different account options – an individual account or a professional account.
The individual account is free to have, but Amazon will charge you $0.99 for each sale you make on top of any applicable FBA fees.
The professional account costs $39.99USD per month, but you will not incur the $0.99 per transaction. So if you plan to sell more than 40 units per month, the professional account will save you money. You also unlock some additional features by having a professional account.
Similar to Shopify, just because you put a product on Amazon doesn’t mean people are going to find it. You need to promote your listing to boost its ranking to the top of page one. The best way to do this is via PPC, or Pay-Per-Click.
PPC is Amazon’s built-in advertising platform where they will show your listing when people search for keywords related to your product. The idea behind this is people will click on your ad, buy your product, which will boost your organic rank.
Even with a budget of $10 per day, that’s $300 per month you need to budget for just for advertising.
Easily the largest expense when selling products on Amazon will be the cost of inventory. Since you need to buy all of your products up front, you need the capital ahead of time to get it in stock. You should consider having $3,000 to $5,000 available to launch your first product.
Which is better for beginners?
In the debate of Shopify vs Amazon when it pertains to a beginner, it really depends on your specific situation.
If you have the money on hand that you are comfortable risking on a new product, then I would suggest that Amazon FBA is better for beginners. You will need to learn the keys to finding a great product, but once you do, the process of acquiring customers is simpler than running a Shopify store.
With Shopify, you still need great products to promote, but you also need to be an expert marketer to drive traffic. If you don’t know how to target your ideal customers with the correct ad copy, then it will be difficult to convince people to visit your site.
There is less financial risk with a Shopify dropshipping store than buying products for Amazon FBA, but you need to be a jack of all trades to make the Shopify store work.
Shopify vs Amazon Conclusion
At the end of the day, both platforms are excellent but each caters to different sales models. In the battle of Shopify vs Amazon, it really comes down to how much work you want to take on yourself, or how much you’re willing to pay for. Are you an expert marketer and have the time to ship out products, then Shopify may be right for you. If you aren’t great at marketing and don’t want to handle customer service issues on a daily basis, then the Amazon FBA model may be a better choice.
