Dropshipping vs Amazon FBA: Which Online Business Is Best in the UK?

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By Callum Scott

If you want to start an online shop, the choice often comes down to dropshipping vs Amazon FBA. Both let you sell products online without a warehouse of your own, but they work in very different ways. One is cheap to start but has thin margins, the other costs more upfront but taps into millions of Amazon shoppers. Here’s how they compare for UK sellers.

What Is Dropshipping?

With dropshipping, you sell products on your own website, but a supplier stores and ships them straight to your customer. You never touch the stock. You just take the order, pass it to the supplier and keep the difference.

What Is Amazon FBA?

FBA stands for Fulfilled by Amazon. You buy stock, send it to Amazon’s warehouses, and Amazon stores, packs, ships and handles returns. Your products also get Prime delivery, which helps them sell.

Dropshipping vs Amazon FBA at a Glance

DropshippingAmazon FBA
Startup costLow, often a few hundred poundsHigher, usually £2,000 to £5,000 or more for stock
Stock riskNoneYou pay for stock upfront
Profit marginsOften thinUsually better, but Amazon fees are high
CustomersYou need to find them, usually with adsMillions of Amazon shoppers already there
Delivery speedCan be slow if suppliers are overseasFast, with Prime
ControlYour own brand and websiteAmazon sets the rules
EffortMarketing and customer serviceProduct research and stock planning

Pros and Cons of Dropshipping

Pros

  • Very cheap to start, with no stock to buy.
  • You can test lots of products quickly.
  • You build your own brand and customer list.

Cons

  • Margins are often small once you pay for ads.
  • You rely on suppliers for quality and delivery times.
  • Lots of competition selling the same products.

Pros and Cons of Amazon FBA

Pros

  • Amazon brings the customers.
  • Prime delivery boosts sales and trust.
  • Amazon handles packing, delivery and returns.

Cons

  • You pay for stock before you’ve sold anything.
  • Fees add up, including a monthly selling plan, referral fees on each sale and fulfilment and storage fees.
  • Amazon can change the rules or suspend your account.

How Much Can You Make?

It varies hugely. Many dropshippers aim for margins of 10% to 30% after product costs, but ads can eat most of that. FBA sellers often target 20% to 30% profit after all Amazon fees. Most people don’t earn much in the first few months, and plenty never turn a profit, so start small and test before you scale.

Tax for UK Online Sellers

  • The trading allowance lets you earn up to £1,000 a year from selling tax free. Above that, you’ll need to register for Self Assessment.
  • Once your turnover passes £90,000 in a rolling 12 months, you must register for VAT.
  • Platforms like Amazon and eBay now share seller data with HMRC, so it’s important to keep good records.

As you grow, you might set up a limited company. See our guide to choosing the right company structure.

Dropshipping vs Amazon FBA: Which One Should You Choose?

Choose Dropshipping If

You have a small budget, enjoy marketing and want to build your own brand online.

Choose Amazon FBA If

You have a few thousand pounds to invest, want access to ready made customers and are happy to research products carefully.

Or Try Both

Some sellers start with dropshipping to test which products sell, then move the winners to FBA with their own branded stock.

How to Get Started

Step 1: Research Your Product

Look for items with steady demand, decent margins and not too much competition.

Step 2: Work Out the Real Costs

Include product costs, fees, delivery, ads and returns. Our free budget planner can help you keep track.

Step 3: Start Small

Test with a small order or a few products before putting serious money in.

Step 4: Reinvest Your Profits

Put early profits back into stock and marketing to grow faster. For more ideas, see our list of side hustles in the UK and passive income ideas.

Dropshipping vs Amazon FBA FAQs

Is Dropshipping Legal in the UK?

Yes. You must follow consumer law, including clear delivery times, returns and refunds, and you’re responsible for the products you sell.

Can You Do Amazon FBA From Home?

Yes. Amazon does the storing and shipping, so you can run it from your laptop.

Which Is Better for Beginners?

Dropshipping is cheaper to try, but FBA often makes more money in the long run if you pick the right product.

About the author

Callum Scott

Callum runs his own business in Manchester and invests in dividend shares and buy to let property. He founded Iceburg Wealth in 2023 to explain UK money matters in plain English, using official sources. He's not a regulated financial adviser, and nothing on this site is personal advice.

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