Shopify vs. Amazon FBA – How to Decide Which is Best for You

If you’re in the process of creating your first eCommerce business, you’ll eventually come to the point where you need to decide if you want to launch a store on Shopify, or join Amazon FBA as a seller.

But when you look up the differences between Amazon FBA vs. Shopify, you get long lists comparing features and prices (which you likely already know).

You don’t need a breakdown of features and price points, you need to know which platform will support you best.

In this post, we’re going to go over the benefits, negatives, and reasons why you should choose one platform over the other.

What is the difference between Amazon and Shopify?

Before we get ahead of ourselves, it’s obvious to some, but a lot of people don’t know the core difference between Amazon and Shopify.

Amazon is an online marketplace where sellers (like you) can offer their products to people shopping on the Amazon site, while Shopify is software that people can use to create an online store where customers can buy their products.

To put it in even more simple terms: Amazon is an existing online store that you add your products to, and Shopify makes it easy to build your own online store.

Shopify isn’t the only platform to build a store, and Amazon isn’t the only online marketplace.

They are the market leaders in both of their categories, which makes them a great place to start a business.

If you’re trying to decide which platform is right for you, let’s get into benefits, negatives, and why you should choose one over the other.

Part 1 – The Benefits and Negatives of Amazon

Benefits of Amazon FBA

Let’s start with Amazon.

Almost everyone knows about Amazon Prime these days. As of 2021, Amazon Prime has over 147 million US subscribers.

However, a lesser known fact is 50% of Amazon’s sales come from third party sellers, 500,000 of those are US-based.

There’s a reason so many sellers are on Amazon.

Let’s look at some of the benefits to start your eCommerce business as an Amazon seller:

Benefit #1 – Access to the Amazon Audience

This is the biggest reason why people sell on Amazon.

Amazon has some pretty strong stats:

• They captured 41% of the entire eCommerce market in 2021
• They are the 3rd largest search engine in the world
• As previously mentioned, there are 141 million US Prime Members
• According to EcomCrew, the average conversion rate on Amazon is 10%-15%, compared to the 1%-2% of a regular site

Using Amazon FBA, your products are Prime Eligible, granting fast and free shipping to Amazon Prime customers.

There are many perks to having Prime eligible products. Some include:

• Products sent from Amazon’s warehouses have the Prime logo on Amazon’s site
• Products have free and fast shipping to Prime members (or free shipping for $25+ orders for non-Prime members)
• Prime products typically rank better than non-Prime products on Amazon.com.
• Amazon will handle many aspects of your business with Prime products, things like shipping, returns, some customer service, etc.

You can start to see why this is a huge benefit to selling on Amazon.

Your products become part of Amazon’s world-class fulfillment network, you get access to an absolutely huge audience that you can’t get anywhere else, and the conversion rates are through the roof.

And that’s just one benefit.

Benefit #2 – Ability to start small and sell fast

To go from zero to selling a product can be very fast on Amazon (at least faster than most avenues).

There is very little to stop you:

• Simple to start. You don’t need to incorporate or officially start a business entity.
• No EIN required. Sell as an individual, which is great if you want to test an idea without committing too many resources.
• Many products have no restrictions, so you don’t need any approval or certifications to sell within many categories. Just make the listing and you’re golden.

On top of this, you can get your first sales fast utilizing Amazon PPC.

With Amazon’s internal advertising, once you’ve got your listings live you can have your first sales quickly.

Benefit #3 – A lot of difficult business tasks are handled by Amazon

This has some overlap with the first 2 benefits, but it deserves its own slot.

Running a business is complicated, and Amazon takes care of a lot of the difficult aspects off your plate.

You don’t need to register a domain name, get web hosting, create an online storefront, or do any of the many time consuming, difficult, and costly requirements of starting a traditional eCommerce business.

Simply register as a seller on Amazon, make the listings, get them into the warehouses, and you’re ready to sell.

On top of that, Amazon will handle product fulfillment, shipping, returns, warehousing, a bit of customer service, and many other aspects of your business.

You can scale an Amazon business pretty far without the need for employees or any manual labor.

So if you want to keep it simple at first, this is a great benefit to starting on Amazon.

Summary of Amazon Benefits

Launching on Amazon is fast, grants you access to an exclusive high conversion audience, and allows you to initially automate and scale your business by yourself.

While it may seem like there’s no downside to launching on Amazon, negatives do exist.

Let’s look at some of those now.

Negative Aspects of Starting on Amazon 

While selling on Amazon is great, there are risks and weaknesses.

It’s not the right platform for all sellers and brands, and a lot of the benefits do come with caveats.

Negative #1 – Amazon can shut you down at ANY moment

Every experienced Amazon seller has had a moment where Amazon has taken down their listings, removed products from search results, or had their entire accounts deactivated.

If Amazon even detects something is off about your account, they’ll instantly isolate and remove the issue, or even deactivate your entire account, leaving you with the mess which can take days or weeks to resolve.

Sometimes problems can hit you that are completely out of your control. Amazon will respond by punishing you first and have you fix it afterward:

• Your listing can get hacked. All your product images are swapped with bogus images, leading to lost sales and potential delisting by Amazon
• Category swap. Malicious attackers can switch the category your product is in, causing it to disappear from search results or get delisted
• Stolen listing (lose the Buy Box). Hijackers can essentially “steal” your listing leading to all sorts of problems like bad reviews and again, delisting

And that’s just naming a few.

The stress of knowing that you not only have to compete with other sellers on Amazon, but also worrying about Amazon itself hurting your business can be no fun.

Negative #2 – Harder to build your brand

Branding is how you stick out from the competition on Amazon.

However, having better branding on Amazon doesn’t mean you’re building a true brand.

Many people don’t even realize Amazon has third party sellers, and believe Amazon the company sources every product they sell.

When you build a brand, you’re grabbing mindshare of an entire demographic. Your brand is aiming to be within a small consideration set of your demographic when they want to make a purchase.

This is all made possible by your marketing efforts. Your website experience, the content your brand produces, social media presence, word of mouth.

On Amazon you’re just one product of many, making it hard to establish yourself as a standalone brand.

You can build your brand on Amazon, but it will be slower until you branch out to other channels.

On your site, you can more easily build a list of customer emails for promotions. You can style your store and site experience how you see fit. There’s more ways for you to build a brand.

When someone purchases your product on Amazon, they’re still an Amazon customer. They aren’t making a purchase because of your brand, rather they are purchasing over others because of your branding.

You can attempt to have them to join an email list through your product packaging, but it’s not easy.

Amazon isn’t doing you any favors when it comes to building a brand, either.

If you go out of stock on Amazon, your product disappears from search results. Amazon then acts as if your product is never coming back.

When you’re out of stock on your site, you can set up an alert for customers to be notified when you’re back in stock, you can allow for pre-orders, there’s options.

It is possible to build a brand on Amazon, but it’s much harder to do than with your own site.

Consider the long term value of Amazon if you’re trying to build a lasting brand.

Negative #3 – Amazon takes a cut of everything

Amazon charges you for every little thing.

A few Amazon charges you’ll experience:

• Simply being an Amazon seller. That’s $40/month
• Referral fee. This is a % based on your product’s price.
• Fulfillment fee. This is based on your product’s size/weight.
• Storage fees. Fee to be stored in Amazon’s warehouses.
• Advertising on Amazon. Rank in top 3 slots, essentially required for many products these days.
• Freight shipping to Amazon warehouses. Smaller cost, but a cost nonetheless.

And there’s more, but these fees can really add up.

Worst still, is that it’s progressively getting more expensive to sell on Amazon. 

PPC and Fulfillment prices keep going up. 3PL (third party logistics) and Amazon Prep Services are becoming a requirement for many sellers. The list of costs is growing with each year.

Amazon charges a fulfillment fee per product sold, even if they’re contained within the same order. If you sell 3 products to one customer in an order, Amazon charges a fulfillment fee for each unit.

This may not seem so bad, but many products are purchased bundled together, which can really eat at your margins.

Summary of Amazon Negatives

Ultimately, the negatives of Amazon are that it is hard to build your brand, you are vulnerable to Amazon’s system, and it can be hard to get good margins if you’re not careful.

While there are a lot of nitpicking negatives about Amazon I could add, they can usually be overstated due to the fact that they are issues that you would face whether you were selling on Amazon or not.

That’s an overview of the negatives and benefits of Amazon, let’s move on to Shopify.

Part 2 – The Benefits and Negatives of Launching on Shopify

Benefits of Launching on Shopify

Shopify is the #1 eCommerce software for creating an online storefront.

Currently, there are 2.6 million Shopify stores in the US.

While not all of them may be “active” sellers, it’s safe to say that’s a lot of stores!

Depending on who you talk to, it might be hard to see benefits of Shopify over Amazon, and vice versa.

But they certainly do exist! 

Let’s go over some benefits of launching on Shopify

Benefit #1 – Build a real brand

With Shopify, you can build a real brand among your product niche that people will remember.

You can build a social media presence, make world class content, have a beautiful website, and they will benefit you 100%, rather than split that benefit between you and Amazon.

It’s hard to overstate the power of a brand.

A powerful brand gets a lot more organic sales through things like word of mouth, search engine traffic, social media presence, etc. Over time, these benefits will compound leading to a ton of low-cost and even free customers.

With Amazon, people will typically learn about your products through Amazon. Many won’t even realize that you’re a unique seller at all.

Brands are a huge competitive advantage, and you can really build a powerful brand through Shopify compared to Amazon.

Benefit #2 – Build a powerful customer base

As the old internet saying goes, “There’s money in the email list.”

With a Shopify store, you can much more easily collect emails of shoppers to eventually promote future products.

This is also possible on Amazon, but it is extremely difficult compared to running your own Shopify store.

With Amazon, you have to capture an email address from a customer after they make a purchase. Either through automated messages you send after they make a purchase (which seems to annoy more people than anything else) or entice them to sign up for your list on the actual product packaging. This isn’t something many people are going to do.

Every email you capture, social media follower you get, and everyone who views your content is a potential customer, and every customer you have access to is a potential repeat customer.

Amazon doesn’t really want you to siphon off their customers and have them buy from your store.

Over time, you can have a great follower base that you simply can’t achieve on Amazon alone. With a contact list, you can always reach out to your base for new product launches and sales.

Benefit #3 – More flexibility

With Amazon, you’re restricted to playing by their rules.

When you run a Shopify site, you can do anything and everything you want. It’s your site, after all, so you make the rules.

• Promotions. You can create any kind of promotion you want. Influencer promotions, classic search ads, social media ads, an email blast to you customer base, the possibilities are endless
• Your site’s look. You can style your site in any way you see fit.
• Sell unique products. Subscription models, bundled products, customized products, products on demand, made-to-order products, digital products, frozen products, fresh food products, etc.

With Shopify, there’s very little you can’t sell, while with Amazon there’s a more narrow set of products that are really compatible.

Summary of Shopify Benefits

Shopify is a great place to start if you’re looking to build a long-term brand and a unique product.

You can be more flexible with how you promote and run your business. Everything you do for your business benefits your business and not some marketplace.

Let’s look at some negatives for Shopify

Negative #1 – Upfront costs are higher

Shopify saves you a lot of money when it comes to getting a storefront setup, at least compared to how they used to be made in the past.

You don’t have to worry about hosting, payment processing is easier, website design is simplified, these potential savings is what made Shopify what it is today.

However, there’s still a lot of upfront costs to getting started, especially compared to Amazon.

Remember, with Shopify you’re starting a business from the ground up, rather than joining a marketplace on an existing site with pre-existing customers.

Finding your first customers and building a website that gets traffic can be costly, especially at first.

Negative #2 – Harder to start small

Since your Shopify store is a standalone website, people will expect it to function like a standalone website.

That means you either have to have a full product line for sale at launch, or you need a unique hero product that’s unique enough to convince people to make a purchase on your site, rather than just easily grabbing something similar on Amazon.

As I mentioned in an earlier benefit, Shopify lets you build a brand, but people will have certain expectations of that brand.

If any aspect of your site seems incomplete, unprofessional, or not worth it for the customer over grabbing the product on a more established website, you won’t get initial traction.

Negative #3 – You’re responsible for everything

With Shopify, since you’re not joining any kind of marketplace to get access to an existing customer base, you’re on the hook for generating traffic to your site.

In fact, you’re on the hook for all aspects of your business.

You’re responsible for sending your products out on time, managing returns, customer service, driving traffic to your website, pretty much everything.

Yes, there are services for a Shopify store owner that mimic a lot of the services Amazon does automatically, but again you have to find those on your own and determine if it’s worth it for your business to use.

Summary of Shopify Negatives

Shopify is a great way to build a strong and lasting brand, but getting started is much more expensive, difficult, and labor intensive than on a marketplace like Amazon.

Part 3 – When You Should Pick One Platform Over the Other

With the benefits and negatives out of the way, let’s look at some of the reasons why you should choose Shopify over Amazon, or vice-versa for launching your new business.

When Amazon over Shopify

Reason #1 – You are launching with a single product 

On Amazon, it’s very easy (and even recommended) to launch a new business with a single product.

This is good advice for those just starting out for a few reasons:

• Risk. Lower initial investment.
• Knowledge. Learn how to navigate the Amazon system.
• Scale. Validate a product to eventually expand into a niche market.

While you can launch with a single product for Shopify, and that is actually recommended in some situations, for Shopify if you want to launch with a single product, it has to be a very innovative product that is redefining your category.

With Amazon, launching with a single product might be something that improves on existing products in slight and subtle ways, but enough to drive sales.

Reason #2 – You are planning for a fast exit through aggregators

Amazon aggregators are buying up Amazon accounts in record numbers these days.

While you can sell a Shopify business just as easily as you could an Amazon account, the large pool of Amazon aggregators makes for a clear and simple exit strategy.

It’s very possible these days to build up an Amazon account over 1-3 years and sell them for a pretty penny.

Shopify, being more difficult to start and manage initially, will take longer to sell and find a buyer for.

Amazon is the clear winner here if you’re not committing to running the business long term.

Reason #3 – You want the business to be a one-person operation

While also possible on Shopify, Amazon is remarkably simple to run completely on your own from the comfort of your own home.

You can scale an Amazon business quite high before you’re spread too thin and need someone else to start taking on other duties.

You can run an entire eCommerce business without physically storing or touching the product yourself.

And as a bonus, if you think your Amazon business is beginning to get too difficult to manage on your own, you can sell the entire business and start from scratch!

When you should pick Shopify over Amazon

Reason #1 – You’re looking to build a long-term brand

Calling back to the benefits of branding earlier, Shopify is the way to go if you’re trying to build a long term business that lasts for years.

A site with a strong impact on search engines, a high social media presence, and great word of mouth can generate untold amounts of revenue. You can earn fiercely loyal customers that will buy from you repeatedly and even market your product for you through referring friends and family.

If you’re in it for the long haul and want to create something big, go with Shopify.

Reason #2 – Your product is extremely innovative, highly priced, or unique

Some products are simply not compatible with Amazon.

For example, many clothing businesses, especially on the higher end, will forgo selling on Amazon. It’s too difficult for them to stand out from all the low-cost options, and Amazon’s extremely generous return policy can hurt if you’re in a high-return category such as clothing.

This is true for many higher end products. People are typically looking for a deal on Amazon, selling higher end products can be difficult for this reason. If your product costs hundreds or maybe even thousands of dollars, it might be wise to stick to selling it on your own site.

There’s many cases where you wouldn’t want to sell on Amazon:

• Products that are made-to-order
• Sold on a subscription model
• Have customization options
• Rely on repeat customers
• Require specialized shipping
• May not be able to be reasonably sold on Amazon

If your product is truly unique and an industry disruptor, it will be hard for people to discover your product on Amazon, as most people on Amazon already know what they want, rather than using the site for discovering and browsing new products. 

Based on your product idea and what you want to launch, you can determine if Amazon is a good channel for you.

Reason #3 – You don’t like Amazon

Maybe you don’t like Amazon and think they’re bad for eCommerce (or the world in general), and that selling on the platform only makes you part of the problem or conflicts with what your brand is trying to accomplish.

Maybe you don’t like Jeff Bezos.

Whatever the reason, not everyone out there is a fan of Amazon. If you don’t want to contribute to their success, you don’t have to. Thousands upon thousands of sellers run successful eCommerce businesses and don’t have to sell on Amazon at all.

One of the best parts about starting a business is you can choose whatever direction you want to take things. If it’s not in your brand to work with a company like Amazon, you don’t have to.

Part 4 – Putting it All Together

Is it possible to sell on both Shopify and Amazon?

The quick answer is yes.

However, you will likely want to start with one over the other, and then expand into the other in the future.

Since Amazon is typically faster to get started with, a lot of people prefer to start on Amazon then eventually transition to strengthening their brand by building a Shopify store once they have a full product line.

See what makes sense for your business and if you want to go the multi-channel approach. There are other marketplaces out there like Etsy and Walmart that are worth looking into as well.

Funding Your Business as it Grows

In today’s world, it’s hard for small businesses to get loans for any reason, even less so for an online business.

Luckily there exist companies like Onramp Funds (that’s us!) that can help you fund your product restocking for both Amazon and Shopify.

With it being more costly and taking longer to restock than ever before, combined with traditional lending not being an option for eCommerce businesses, solutions like Onramp that can get you funds quickly.

We measure loans based on product sales instead of credit score, so you can get funds fast, scale your business, and prevent stock outs.

When you’ve built up your business a bit and want to really start growing, reach out to us and we can help!

Conclusion

Based on the kind of business you want to start, there is definitely a benefit to choosing one of these two platforms over the other.

How you envision your business starting and where you see it going will be the best way to decide if you want to go with Shopify or Amazon.

With the information laid out in this post, you should be able to easily choose which platform works best for your budding business.

Thanks and good luck selling!