Is Amazon FBA worth it?
When it comes to Amazon FBA, there are a lot of questions that come up. Is Amazon FBA worth it? What are the advantages? How much effort is required? We’ll go over Amazon FBA in detail and help you decide if it’s good for you!
If you’re considering whether or not to start using Amazon FBA, you want to make sure that it’s worth your time and money. Amazon is the world’s biggest online marketplace. And it is growing exponentially. The strengthening position of Amazon encourages start-ups and brands to showcase their products on the ecommerce giant.
But making the decision to start selling, is Amazon worth it or not? Yes, this is a big decision! Let’s go over some of the things you should think about before making a final decision. By weighing the pros and cons of Amazon FBA, you can figure out if it’s the right choice for your business.
Amazon has over 9.5 million sellers and over 2,000 new sellers are joining every single day which means selling on Amazon is starting to get really saturated. But keep in mind that in 2021, Amazon was a $1.67 trillion company.
Amazon.com did over 400 billion dollars in e-commerce sales. The crazy thing about that is two-thirds of all sales that happen on Amazon are from third-party sellers that are people like you and me selling on Amazon’s platform.
Everything has both advantages and disadvantages in this world. In the realm of ecommerce, the same may be stated. It’s your way of thinking that gets you inspired by the advantages or demotivates you by focusing on the disadvantages.
Pros
- Market with worldwide ecommerce potential
- Prime Customer Badge
- Customer Trust
- Logistics
- More scalability
- More storage space
- Omnichannel fulfillment
Market with worldwide ecommerce potential
Amazon is taking away all the traffic of the Google search to their website related to product and price comparison. Amazon has made a relationship with their customers and they rely on Amazon to get the idea about the product and prices. The easy to use and Central system has been making life easy.
In the 2021 report on consumer behavior, 75% of the consumers check the price and product review before the purchase. This authority build-up is more important for business owners around the world to get into Amazon for more business visibility and brand growth.
Prime Customer Badge
64% of the households in the US have amazon prime which has almost 80 million subscribers. This is the US alone that you can imagine the worldwide subscriber for amazon prime. Amazon Prime badge grants you access to the Amazon Prime client base. These customers love to buy the product through the Prime network due to the fast and reliable shipping of the product.
Customer Trust
Being the number one, especially in the ecommerce market place is all about the trust and long-term relationship that Amazon has built-in its journey since 1994. The most powerful tool they used for this is their top priority to the customers. Customers’ trust in Amazon helps you to have that trust in your product being displayed on this ecommerce platform. This in return helps you to boost the growth of your brand.
Logistics
The worldwide system of Amazon for fast delivery and a massive network of fulfillment centers helps you in the growth of your brand. You can focus on product research and development while Amazon takes care of the shipping and handling. Amazon has a large and established customer base that you can tap into.
Orders are automatically fulfilled and tracked, so you don’t have to worry about lost or damaged products. Amazon offers comprehensive customer service in case any issues arise with an order. You can outsource your entire fulfillment process to Amazon, or just use them for certain aspects of it.
More Scalability
Amazon FBA offers more scalability than other ecommerce platforms due to a large number of active customers. With Amazon FBA, you can reach a larger audience than you would on your website. You don’t have to worry about shipping or handling products yourself. Amazon FBA takes care of all the logistics for you. You can focus on growing your business and expanding your product line. Amazon FBA is a cost-effective way to sell products online.
More Storage Space
With 175 fulfillment centers, Amazon is ready to store and ship your product all around the world. Amazon FBA can help you declutter your home by storing your extra belongings. Amazon FBA can help you make money while managing all your products with fully controlled storage and shipment. Amazon FBA is a great way to organize and store your product. Amazon FBA is a safe and secure way to store.
Omnichannel Fulfillment
Amazon FBA can help you reach more customers than you would be able to on your own. But with this, Amazon also helps you in shipping the product to your customer order other than Amazon. This Omnichannel fulfillment method is helping more growth of the brands with the prime logistics services of Amazon. You get the order on your website, social media or through your marketing and it would be fulfilled by Amazon.
Cons
- Product preparation for FBA
- FBA Fees
- Amazon Return Policy
- Sales Tax
- Loss of Control
Product Preparation for FBA
When you decide to land in the Amazon warehouses by having the Amazon FBA, you have to check the list of requirements and investments to have this opportunity. Making an inventory is a real challenge for you, especially for thousands of products.
The investment from the start of hunting the product to the Amazon warehouses is making the Amazon FBA a risky model to work on.
FBA fees
When you run a business, you always think of making money. The same applies to Amazon. Amazon is providing the services to make the money. So it is of no surprise that the premium benefits of Amazon are not without the money.
Amazon FBA fee is expensive and can eat away all your profits. You have to pay for storage, which can add up over time as a monthly fee. The fees are not always transparent, so it’s hard to know exactly how much you’re paying. You have to pay for the storage cost based on the product size and weight.
Returns can be costly and time-consuming. If you get an order and the customer cancels the order Amazon still charges you the fee for that. Similarly, If your products don’t sell well, you could end up losing money.
Amazon Return Policy
Amazon is a customer-centric platform. This means that the authority they give to the customer is much more than any other ecommerce platform. It is the way they are winning the customer but on the other hand, the seller has to pay for that. Amazon will charge the return fee from the seller. This adds up to the cost and ends up in lesser margins.
Sales Tax
You have to build the brand worldwide through Amazon. You want the growth of your brand exponentially. But this will come up to you with all the taxes. There are separate rules and regulations for all types of taxes on products and services around the world.
Being a part of Amazon FBA, you have to bear all the different types of taxes based on the countries and even the regions. In the journey with a worldwide ecommerce platform with customers all around the world, you have to add the taxes to your profit margins to have growth.
Loss of Control
If you are the type of person who wants control of your inventory and wants to change things from time to time, then Amazon FBA is not your game. Once you set up the inventory and packaging for the product and send it to the fulfillment center then the game is now not in your hands.
Once it’s in the warehouse you have no control of that. You can’t change the labeling, packaging, and branding.
Ways of doing Amazon FBA
- Retail Arbitrage
- Wholesales
- Private Label
- Unique Product
Retail Arbitrage
Retail Arbitrage is the process of making money by the price difference in two or more markets. You have to do the market research of the product and pick the product at a low price from the market and sell it in another market with a high price.
This price difference is helping people make money and some people are running it successfully.
For instance, You see a product in the local market with a price of $10, and the same product is on Amazon with a $25 price. You pick that product from the market and start selling it on Amazon.
The retail arbitrage will be a good option for Amazon FBA as you have to pick the product from the market and Amazon will do the further processing. You have to be free from the tension of packaging and shipping.
The only issue with this model is the scalability as products may become short in the market but you have more orders on Amazon so you have nothing to do as you don’t own the product.
Wholesales
Wholesale is the method of picking up the product in bulk at a low price from the manufacturer and then selling them at a higher price in the market. Wholesale is also the method of establishing the business on Amazon. You have to buy the product and ship them to the warehouse and Amazon will take care of the further process.
The issue with this model is that it will be done by people who study the difference between the market and Amazon. Even the company may also jump into Amazon after seeing huge success.
Private Label
Private label is the process of labeling the product already on the market with your brand name and then selling them on Amazon. The private label method is one the most successful methods as it is like selling your product.
The product gets recognition with your brand name and will help you make the profits. The problem with this model is price management as you are not the manufacturer of the product so the real manufacturer may increase the price and you become unsustainable to gain the profit.
Unique Product
If you want to be successful on Amazon in every way, you must have a distinctive product. A unique product may be a product that is designed by you and you have all the secrets of that product. You will make the adjustment if you own the product and have control over the manufacturing process.
You create your product, there is no similar product on the market, and you manufacture it yourself, then you patent it and sell it on Amazon under your brand name.
It will be much easier to promote your goods if you have control over the manufacturing and costs. All other product processing is handled by Amazon FBA. All you have to do now is create the product and ship it to Amazon’s fulfillment center.
Final Fulfillment Thoughts
It is the year 2022. With each passing day, consumer behavior shifts. If you read that behavior and strive to choose approaches that would attract potential customers, you are a true entrepreneur. We’ve given you the details and approach for dominating the Amazon FBA model on the ecommerce platform.
If you still have the question, is Amazon FBA worth it in 2022?
Take a break. As an entrepreneur, rethink everything you have ever thought. Look for the option we’ve given you. Take a deep dive into the research and begin with anything you believe has the potential to make you wealthy. You must take the risk of starting it and then drawing conclusions based on the results.
