What Is Amazon FBA?
FBA stands for Fulfillment by Amazon. You purchase inventory, send it to an Amazon warehouse, and from that point Amazon handles everything: storage, packing, shipping, customer service, and returns.
Your products receive the Prime badge and are delivered with Prime shipping (1-2 days). You pay Amazon FBA fees (storage and fulfillment fees), calculated per unit.
For more on FBA and how to get started, see our guide: What Is Amazon FBA?
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What Is Dropshipping on Amazon?
With dropshipping on Amazon, you list products that you do not physically hold in inventory. When a customer orders, you purchase the product from your supplier, and the supplier ships directly to the customer. You never touch the product.
Important: Amazon allows dropshipping but with clear conditions. You must be the seller of record (your name on invoices and packing slips), you may not use another retailer's packaging, and you are responsible for customer service and returns. For a detailed post on this, see Amazon Dropshipping 2026.
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The Big Comparison Table: FBA vs Dropshipping
| Criterion | FBA | Dropshipping |
|---|---|---|
| Startup capital | EUR 1,000-5,000 (inventory must be pre-financed) | EUR 200-500 (no inventory needed) |
| Margin | 15-40% (higher due to bulk purchasing) | 5-15% (lower due to single-unit purchasing) |
| Shipping control | Amazon controls (reliable, fast) | Supplier controls (variable, slower) |
| Scalability | High (Amazon infrastructure, unlimited warehouse space) | Medium (depends on supplier capacity) |
| Risk | Medium (inventory pre-financing, storage costs) | Low (no inventory risk, no tied-up capital) |
| Daily time investment | Low (Amazon handles logistics) | Medium (forwarding orders, managing suppliers) |
| Prime badge | Yes (automatic with FBA) | No (only with Seller Fulfilled Prime, very difficult) |
| Buy Box chance | High (FBA is preferred by Amazon) | Low (FBM offers have a disadvantage) |
| Return handling | Amazon handles it | You must organize yourself |
| Product quality | You inspect goods before sending to warehouse | You rely on the supplier |
| Delivery time | 1-2 days (Prime) | 3-10 days (depending on supplier) |
| Storage fees | Yes (Amazon FBA fees, long-term storage) | No |
| Suitable for beginners | Yes (well documented, large community) | Somewhat (lower entry barrier, but higher daily complexity) |
| International scaling | Easy (Pan-EU, EFN, Multi-Country) | Difficult (supplier must ship to various countries) |
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When FBA Is the Better Choice
FBA is the stronger model if you want to build a long-term Amazon business. Here are the situations where FBA clearly wins:
You Want to Win the Buy Box
The Buy Box determines 82 to 90 percent of all Amazon sales. FBA offers are favored by Amazon's algorithm. If you compete on a competitive ASIN with 5 other sellers, FBA gives you a massive advantage over a dropshipper using FBM.
You Want to Reach Prime Customers
Prime members frequently filter by Prime shipping. If your offer does not have the Prime badge, a large portion of Amazon's highest-spending customers will not see you. FBA gives you the Prime badge automatically.
You Sell a Manageable Catalog With High Turnover
If you have 20 to 100 products that sell regularly, FBA is ideal. You order larger quantities once, send them to Amazon, and Amazon handles the rest. Your daily effort is minimal.
You Want to Sell Pan-EU
FBA makes selling across multiple European marketplaces extremely simple. You send your products to a German Amazon warehouse, and Amazon distributes them through its European logistics network. Your products are offered in France, Italy, Spain, and other countries with local delivery times.
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When Dropshipping Is the Better Choice
Dropshipping has its strengths in certain scenarios. Here is when it makes sense:
You Have Limited Startup Capital
The biggest advantage of dropshipping: you do not need to pre-finance inventory. You only buy when a customer has already ordered. This reduces your financial risk to a minimum. If you want to start with EUR 300, dropshipping is the more realistic path.
You Want to Test the Business Model
Before investing thousands of euros in inventory, you can use dropshipping to test which products sell on Amazon. You list products, observe demand, and if a product performs well, you can later switch to FBA.
You Sell Bulky or Heavy Products
For very large or heavy products, FBA storage and shipping fees can become disproportionately high. If your supplier can ship directly and delivery times are acceptable, dropshipping may be more cost-effective.
You Have a Very Large Catalog
If you want to list 5,000 different products, it is unrealistic to stock all of them. Dropshipping lets you offer a huge catalog without pre-financing inventory. However, keep in mind that your Buy Box chances are lower without FBA.
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The Hybrid Model: Combining FBA and Dropshipping
Experienced Amazon sellers often use both models simultaneously:
- FBA for bestsellers: The 20 to 50 products that sell best run through FBA. They get the Prime badge, win the Buy Box, and generate the majority of revenue.
- Dropshipping for long tail: Products with lower demand or products you want to test are fulfilled via dropshipping. This gives you a large catalog without pre-financing inventory for slow movers.
The hybrid model combines the strengths of both approaches: high Buy Box rate and Prime for your core products, broad catalog without inventory risk for the rest.
The transitions are fluid: when a dropshipping product generates consistent sales, you switch it to FBA. When an FBA product barely moves, you switch it to dropshipping or remove it from your catalog.
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Repricing for Both Models: Why It Is Critical
Regardless of whether you use FBA or dropshipping -- repricing is critical for both models. The reason is the same: you compete on Amazon with other sellers for the Buy Box, and price is one of the most powerful levers.
Repricing With FBA
As an FBA seller, you already have a Buy Box advantage. But when three other FBA sellers are active on your ASIN, price decides. A repricer helps you:
- Hold or win back the Buy Box
- Raise your price when competitors go out of stock
- Protect your margin by never going below your minimum price
- React across all EU marketplaces simultaneously
Repricing With Dropshipping
As a dropshipper, repricing is even more important. Since you do not have the Prime badge and your shipping times are longer, you need to be more aggressive on price to win the Buy Box at all. At the same time, your margins are thinner, making precise price control even more critical.
A repricer ensures that you:
- Find the optimal price for your FBM offer
- Never go below your minimum price (which can happen quickly at 5 to 15 percent margins)
- React instantly when competitors change their price
- Maximize your Buy Box chances despite the FBM disadvantage
For both models: without a repricer, you react too slowly. Your competition uses automated tools and adjusts prices in seconds. If you do not do the same, you lose sales and margin. For a comprehensive comparison of available repricing tools, see here.
> FBA or dropshipping -- your repricer works with both. arbytrage.io optimizes your prices regardless of fulfillment model. 6 strategies, Pan-EU support, from EUR 40/month. Start your free trial
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What the Numbers Say: A Realistic Comparison
To make both models tangible, here is an example with a product selling for EUR 29.99 on Amazon:
FBA Calculation
| Item | Amount |
|---|---|
| Selling price | EUR 29.99 |
| Purchase price (wholesale) | EUR 14.00 |
| Amazon Referral Fee (15%) | -EUR 4.50 |
| FBA Fee (Pick & Pack) | -EUR 3.50 |
| Profit per unit | EUR 8.00 (26.7%) |
Dropshipping Calculation
| Item | Amount |
|---|---|
| Selling price | EUR 29.99 |
| Purchase price (single unit from supplier) | EUR 20.00 |
| Amazon Referral Fee (15%) | -EUR 4.50 |
| Shipping cost (supplier to customer) | -EUR 3.00 |
| Profit per unit | EUR 2.49 (8.3%) |
The difference is obvious: with FBA you earn EUR 8.00 profit, with dropshipping only EUR 2.49 -- at the same selling price. The reason: with dropshipping, you purchase at higher per-unit costs (no volume discounts) and carry your own shipping costs.
On the other hand, dropshipping carries no inventory risk. If the product does not sell, you lose nothing. With FBA, you have EUR 14.00 per unit invested, sitting in Amazon's warehouse incurring storage fees.
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The Decision: Which Model Fits You?
Ask yourself these four questions:
1. How much startup capital do you have? Under EUR 1,000: start with dropshipping. Over EUR 2,000: FBA is realistic.
2. How much time do you want to invest? Little time: FBA (Amazon handles logistics). More time available: dropshipping can work but requires daily management.
3. How important is the Buy Box to you? On competitive ASINs: FBA. On niche ASINs with little competition: dropshipping may suffice.
4. Do you want to sell Pan-EU? If yes: FBA. Pan-EU with dropshipping is logistically very complex.
Also check our post on FBA vs FBM for more detail on fulfillment options.
> Whichever model you choose -- your repricing must be solid. arbytrage.io works with FBA and FBM, reacts in seconds, and protects your margin. From EUR 40/month. Sign up now
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Frequently Asked Questions (FAQ)
Can I win the Buy Box with dropshipping?
Yes, but it is harder. Dropshipping offers run as FBM (Fulfillment by Merchant), and Amazon favors FBA offers for the Buy Box. You can win the Buy Box as an FBM seller if your price is significantly lower, your seller metrics are excellent, and no FBA seller is active on the ASIN. In practice: on ASINs without FBA competition, you have good chances. On ASINs with FBA sellers, you need to be very aggressive on price.
Is dropshipping on Amazon even allowed?
Yes, Amazon explicitly allows dropshipping -- but with clear rules. You must be the seller of record, you may not use another retailer's packaging, and you are responsible for customer service and returns. What Amazon does not allow is purchasing from another Amazon seller or another online retailer and having them ship directly to the customer.
Which model do you recommend for absolute beginners?
If you have the capital (from EUR 2,000), we recommend FBA. It is the more stable model with higher margins and better Buy Box chances. If you have limited capital, start with dropshipping to learn the business model, and switch to FBA once you generate enough revenue.
Can I switch from dropshipping to FBA?
Absolutely. Many sellers start with dropshipping and gradually move their best-performing products to FBA. The switch is simple: you order a larger quantity from your supplier, send it to Amazon's warehouse, and your listing switches from FBM to FBA. Your price, reviews, and sales history are preserved.
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Summary
FBA and dropshipping are both viable paths to selling on Amazon. They address different starting situations and each has clear strengths and weaknesses.
- FBA offers higher margins, Prime badge, better Buy Box chances, and easy Pan-EU scaling -- but requires startup capital and carries inventory risk
- Dropshipping requires little capital and carries no inventory risk -- but offers lower margins, no Prime, and weaker Buy Box chances
- The hybrid model combines the strengths of both approaches
- Repricing is critical for both models -- for FBA to optimize margin, for dropshipping to maximize Buy Box share despite the FBM disadvantage
- The choice depends on your startup capital, available time, and growth goals
Regardless of which model you choose: without intelligent pricing, you leave potential on the table. A repricer is not a luxury for either model -- it is a tool that pays for itself from day one.
> Start with the repricing that fits your model. arbytrage.io works with FBA and dropshipping, on all EU marketplaces, from EUR 40/month. Sign up free and get started