Shopify or Amazon? Which is Better?

Whether you’re starting to sell online for the first time or you’re already selling on one channel but looking to expand into omnichannel, many ecommerce sellers evaluate whether it’s better to sell on Amazon or Shopify.

First, What’s the Difference?

Shopify vs. Amazon FBALet’s start with the basics.

Shopify is a shopping cart; Amazon is a marketplace.

Imagine you’re walking down an urban street or a shopping mall. You see stores to the left and stores to the right. They are all individually branded with each store’s name, and all the products inside are sold to benefit the owner of that store. You probably came here to visit a specific store. Whoever owns the real estate for the store is the equivalent of Shopify. They help your store exist, and they make it visible to the world, but your unique store is branded to your company and your company alone.

Now, instead, imagine yourself at a modern bazaar. You came here for one specific item or maybe just to visit the market itself. Chances are you don’t have the foggiest clue who is there selling stuff, and it’s likely you don’t really care. The modern bazaar is Amazon.

That, my friends, is the difference between an online shopping cart (Shopify) and a marketplace (Amazon).

Now, Which One’s Better?

As usual, the answer is… it depends. Some of the different characteristics you’ll want to evaluate are: convenience, access to customers, flexibility, payments, visibility, cost, and risks.

Convenience

Back in the early years of online retail, people had to invest huge dollars in creating a website with the ability to securely accept online payments. People paid tens of thousands of dollars for huge custom development on systems like Magento. Now, also every online seller we know is setting up their online store in a matter of hours on Shopify. It’s quick, slick, and easy to use right out of the “box.”

Shopify also integrates with tons of apps which allows you to either fulfill products yourself or fulfill them using third-party logistics (3PL) or even using Amazon.

As for Amazon, a huge portion of online retailers start selling on Amazon before they sell anywhere else because Amazon makes it so stinkin’ easy, particularly if you use Amazon FBA (Fulfilled by Amazon). Amazon will store your products, list them on their website, and when you make a sale, they’ll pick, pack, and ship out your products (again, if using FBA).

If you don’t want to deal with the costs associated with FBA (which we’ll talk about in a second), you can also choose to sell as Amazon FBM (fulfilled by merchant). Amazon will store and list your products, and when a sale is made, you are the one who ships the products to your customers.

In short, you can get up and running quickly and easily no matter which one you choose.

Access to Customer List

Access to your customers is one of the biggest issues for most online sellers. It’s not enough to get your products shipping quickly to your customers. You want a list of your customers so you can later market to them and encourage them to return to your store.

When you build a Shopify store, again, it is your store, so you have full access to and control over your customer list. This is a huge benefit when you when to send out coupons, make announcements about sales, or even just build a fan base consisting of people who have already bought your products.

Amazon, on the other hand, considers your customers *their* customers, and they don’t share a detailed contact list of those customers with you. Because of this, sellers need to rely more on paying for Sponsored Products ads (paid to Amazon, of course) to reach their target market.

Customization

Customization is where Shopify shines. When you set up a Shopify store, it is YOUR store, so you can do pretty much whatever you want with it. Shopify is particularly helpful for sellers who want to create different stores for different brands because you can create as many stores as you want.

However, if you’re selling on Amazon, yes, you can customize product descriptions, but you are on Amazon’s platform and adhering 100% to Amazon’s terms and conditions. Amazon has an amazing labyrinth of rules and regulations, and violating any of their terms can result in termination of your ability to sell on their platform. (More on this under Risks.)

Also, although you can now open up a second store on Amazon, you need to request permission from Amazon to do so. (Check out this video for tips on how to open a second store at Amazon.)

Payments

Payment ProcessorsPart of Shopify’s flexibility relates to merchant processors. Shopify integrates with approximately a gazillion different payment processors such as Shopify Payments, PayPal, Authorize.net, FattMerchant, and on and on. If you have a favorite, plug it in, and you’re off and running, often with regular batch payouts every 2 - 4 days. (Bonus tip: you’ll want at least two payment processors. If one goes down for some reason, you’ll have an alternative way of accepting payments so sales don’t come to a screeching halt.)

Amazon, on the other hand, is its own payment processor, and they decide when payments are going to be made. The vast majority of sellers receive their payments every two weeks like clockwork. The good news is it’s predictable, but they do hold onto your money for quite a long time, and there’s nothing you can really do about it.

Visibility

If you’re using Shopify, it’s not enough to simply build your site and, poof, expect the sales to start rolling in. This is a case of - if there’s a store in the woods but no one hears about it, does it really exist? You really have to be at the top of your marketing game to get eyes on your site and make sales.

The same can be true of Amazon *if* your product is just one of thousands of identical products. However, if you have a product that’s particularly unique or difficult to come by, you can do extremely well on Amazon because everyone and their Aunt Betty goes to Amazon first when they’re looking for something to buy.

Cost

Considering everything that Shopify gives you right out of the box, it’s an amazingly cost-effective solution for many sellers. Just $39/month gets you a website to start selling on, and Shopify Plus ($1,000+/mo) gets you a more customized solution for established sellers who have grown into needing more (don’t start there). Shopify Plus adds more functionality, uptime, and performance for high volume sellers. It also includes more robust sales tax collection functionality.

Here’s the other thing, you can actually customize your own solution by selling on Shopify but storing and fulfilling with Amazon.

Amazon, on the other hand, makes money all over the place. Like Shopify, they charge a monthly hosting fee of about $39/month. They also charge long-term and short-term storage fees, the sky is blue fees, and water is wet fees. Altogether, Amazon’s fees total roughly 15% of your total revenue before using FBA. If you’re also using them for fulfillment, that number jumps up to be closer to 25%. Also, these fees are *before* the cost for Sponsored Ads which is advertising (again, provided by Amazon) which has become almost required in order for customers to be able to find your products on Amazon.

Also, although Amazon isn’t increasing their fees as of late, they are now going to start collecting sales tax on the fees they’re charging, so the effective amount that you’re paying is going up even if the fees are technically staying the same.

An important thing to note is that even if you aren’t fulfilling with Amazon (FBA), Amazon will still charge you ~15% in fees for using their platform whereas the comparable solution from Shopify would only be ~3% in merchant account fees. The 12% difference in margin goes directly into your pocket if you use Shopify.

Many people hate it so much that Amazon eats into their margin that they flat-out refuse to sell there. However, the fact that you can select products to sell, ship them to Amazon, and Amazon does all the rest makes it super appealing to people who have high product margin products to sell and limited available time to sell them (think side hustlers). And again, their audience is enormous which makes them really hard to ignore.

Risks

The risks with selling on Shopify are incredibly low. The company is stable and growing in popularity with each passing year. If our client base is any indication, they’ll soon be second only to Amazon (if they aren’t already). Virtually all of our clients have one or more stores on Shopify (in fact, one has ~16 stores on Shopify).

Amazon, on the other hand, is brimming with risks.

By far, the biggest concern from Amazon sellers is that Amazon could suspend their seller account at any time. Everyone has heard horror stories of how they log into their Amazon seller account one day to find it shut down. The seller has ONE CHANCE to convince Amazon that their account was closed in error (even though they may not know why it was closed), and they had better get it right, or they’ll find their entire store closed overnight. It’s both crazy and not altogether uncommon. (Note: there are plenty of companies out there who can both insure you against being shut down and can also help you get reinstated if you are shut down. Those are worth looking into.)

Another area of risk relates to sales tax. Up until June 2018, Amazon FBA has the unique problem of shipping sellers’ inventory to 28+ states which automatically created physical nexus for the seller. Physical nexus resulted in the requirement of sellers to register, collect, remit, and file sales tax in all of those jurisdictions. On June 21, 2018, the US Supreme Court decided on the South Dakota vs. Wayfair case, and essentially, their answer was that states could define “economic nexus” in any manner they saw fit. Because of this, it’s not only businesses selling on Amazon FBA that had to be concerned about sales tax but virtually all online sellers. You can learn more about sales tax issues here.

Ok, So What’s the Answer?

Now that you know all the details on Shopify and Amazon, what is the answer? Is it better to sell on Shopify or Amazon?

Sorry, but this is a trick question. The answer isn’t either/or… it’s both.

You want to protect your business. Without your business, you’re not selling anywhere. You should 100% focus on building your own brand (or brands), and by selling on Shopify, you have a low cost way of doing that without the risk of being shut down arbitrarily. However, it can be hard to get eyeballs on your site when everyone is going straight to Amazon.

You should put yourself wherever your customers might be looking for you. So yes, sell on Amazon (as long as you have the margins to support all the fees Amazon is charging you), but also stabilize your business by selling on Shopify to grow your brand independently from Amazon.

For more information, check out our video, Shopify vs Amazon FBA | Which One is Better?

 

 

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