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Is Amazon FBA dead?
A lot of people often question this, especially those who struggle to find success or do not truly understand how this business model works altogether
So, is Amazon FBA dead? Amazon FBA is not dead. Its a business model that has been around for years, eCommerce is on a steep upward trajectory, as is the market size, power and dominance of Amazon. Amazon is growing substantially year on year, and entering the market has never been easier. However, you do need to run your amazon FBA business correctly if you want to make money from it.
This is a very important question, especially to anyone who is looking to start an FBA business. Its something they will want to know.
Besides, starting an Amazon FBA business has its costs, and nobody wants to waste their money on a business destined to fail.
While you do not have to spend money when it comes to listing products, you still have to invest in products upfront, and you may even want to advertise your products to boost your exposure and sales.
Let’s take a look at the history of Amazon FBA since it launched, its growth and the forecast of where we can expect it to go.
To begin, we must define what Amazon FBA is, learn about how it started, and understand what makes it truly different from other businesses.
Once you get a more rounded, and better understanding of the business model, then you can start to see whether it is in fact, dead, or not.
- 1 What Does Amazon FBA Mean?
- 2 How Did Amazon FBA Start?
- 3 Will Amazon FBA Work In The Future?
- 4 How Did Amazon FBA Become Popular?
- 5 The Rise of Amazon FBA
- 6 Is Amazon FBA Dead In 2020?
- 7 Is Amazon FBA Still Profitable?
- 8 Final Thoughts
What Does Amazon FBA Mean?
Amazon FBA (fulfillment by Amazon) is a business model where you sell either your own private label products, or the products of other businesses on Amazon.
You create your product listings and send your products into Amazon FBA warehouses, where it is stored. At this time, your product will become active on the platform and ready to be ordered.
When customers visit Amazon and purchase your product, Amazon will prepare, ship and send the order to your customer on your behalf.
That’s the simple version of Amazon FBA.
Some do it slightly differently, like asking a supplier to manufacture products with their own branding and packaging, but the model still involves sending inventory to Amazon whom take care of the final distribution.
Some people also use a method called Retail Arbitrage, where they purchase products on sale or at discounted prices in retail stores. Then sending them into Amazon and selling these products at a higher price.
Everyone loves starting an Amazon FBA business because they leverage the power, logistics and market share of the worlds largest eCommerce marketplace – Amazon. You also don’t have to even think about shipping.
The difference between what you paid for a product initially, or your manufacturing costs, and the actual sales price on Amazon, is your take-home profit.
How Did Amazon FBA Start?
This business model isn’t new. It has been around since 2006 when Amazon launched the FBA program.
At the time, it was a revolutionary program. Sellers and businesses could leverage Amazons huge network of fulfillment centers, all for a flat fee.
Before Amazon launched this program, pricing for fulfillment by other companies was highly unpredictable and typically expensive.
It put sellers off, who needed to know exactly what their exact costs would be in order to ensure they turned a profit. Shipping costs, receiving fees, order handling fees and storage fees all play a part, and previously all largely fluctuated and impacted margins.
Yet, since Amazon released their flat-fee structure (an all in one service), sellers could begin selling on the platform with confidence. Knowing fully well what their take home margin would be per product.
And the year before the FBA program launched, Amazon released their groundbreaking delivery service; Amazon Prime.
Guaranteed arrival within two days of an order being processed. And Amazon FBA sellers could leverage it.
Of course, there was little to no other logistic networks like it in the eCommerce space. It was a huge pro of using the platform.
This was all added benefits to a business that was growing in scale very quickly. Amazon launched in 1994 and in just 26 years has become the leading eCommerce marketplace globally.
It is now considered to be one of the Big Four technology companies, along with Google, Apple, and Facebook.
Will Amazon FBA Work In The Future?
Amazon has grown exponentially because of the internet. No longer do you need to visit retail stores, queue, park your car etc. All you need to do is place a few clicks and your order should arrive within the next two days.
In fact, more and more people are turning to Amazon.
This is why retail spaces and outlets continue to close; they just cannot compete with the service of Amazon.
And, Amazon continues to expand its inventory, product lines and number of sellers as time goes on.
They are constantly improving, both their processes, operations and how they work as a company. They are renovating, and they are acquiring other businesses and services to ensure that they continue to be the market leader.
Amazon are very much at the front of the industry; companies are simply copying their model (or attempting to leverage some of the networks Amazon have built and are now in place).
Amazon are typically first to market, and they’ve become a globally recognized brand. They have 13 country-specific sites, and offers Prime in nine of them. And they continue to expand into other countries and marketplaces year on year; this list is growing.
Amazon FBA is never going to be dead. It can only expand; they just have too much market share, influence, control and power.
In fact, the only way Amazon FBA will die is if Amazon does.
How Did Amazon FBA Become Popular?
Amazon FBA has become popular in the last few years due to the likes of YouTube and Social Media.
Many sellers have began reporting on their sales, revenues and earnings; all since using Amazon as a sales channel.
And at the same time, it has all been made possible by two other factors.
- Decline of the Retail space
AliExpress and Alibaba are two notable online retail services, based in China, that allow wholesalers and retailers list their products. They ship globally.
They are in many ways the equivalent of Amazon in the Asian region.
Yet, due to the Chinese economy, exchange rates and their current phase of economic development, products are considerably cheaper.
This is has meant that individuals and businesses in the west (such as the United States, Canada and Europe) have been able to purchase products that they have been able to sell on Amazon for a significant markup. Making profit possible.
Some of the manufacturers and suppliers will even provide private labeling and personalized branding to make products stand out and become differentiated; giving business the opportunity to create new product lines and inventory to sell on Amazon.
This is otherwise known as Private Labeling.
Whats more, many of these Chinese based companies, will even send inventory directly to the Amazon FBA warehouses on the FBA sellers behalf.
Other FBA sellers will send in the inventory themselves. Nevertheless, FBA sellers can acquire inventory cheap, and sell for more on Amazon (to a different target audience).
Decline Of The Retail Space
Beyond this, and with the surge and trend to buying online, many retailers have seen dramatic falls in their sales and profits.
It is in many ways, why high streets and retail outlets are closing down in their numbers. It is also why some previously leading and global businesses are going under altogether.
What this has meant is that a lot of product prices have been slashed or made available for liquidation.
People/business have been able to purchase other businesses products at huge discount. Simply buying them up, sending them into Amazon and reselling them at an inflated price.
This is otherwise known as Retail Arbitrage.
The Rise of Amazon FBA
Now that it is easy to sell on Amazon and its easy to find products, a lot of people now had the opportunity to set up an online business from home. Or do it on the side as a side-gig to their full-time day job.
Add this to the rise of Amazon and you can see why it is such a fruitful opportunity.
Amazon is the largest Internet company by revenue in the world. It is the second largest private employer in the United States and one of the world’s most valuable companies.
It comes as no surprise to learn that Amazon is classified as the world’s most valuable public company; with a value of over $800 billion.
In fact, it has been projected that Amazon’s market share will account for 50% of the entire e-commerce retail market by 2021:
Plus, we have to consider that the eCommerce industry is expanding too!
Due in part to the success of Amazon, eCommerce has exploded in recent years.
Below, you can see a graphs from Shopify which outlines the revenue made in each respective year, which includes Amazon FBA as a business model:
As you can see, eCommerce continues to grow year on year. And quite dramatically at that.
In 2021, the estimate is $4.9 trillion dollars, and with what has happened in recent months, its likely to exceed this prediction.
When you consider that Amazon is at 50% market share, they have contributed $2.45 trillion just by themselves. That’s huge!
People are far more comfortable and willing to purchase online, especially those notable and memorable brands and sites like Amazon.
When buying on Amazon, a lot of customers do not even know that they are buying from an FBA seller. Its win win.
Is Amazon FBA Dead In 2020?
Due to the growth of Amazon and the success many sellers have had, FBA has become a hot trend.
Many people have quickly jumped into the business model, thinking that all is required is to find cheap products, send them into Amazon and turn a considerable profit.
After a few months, either their costs nullified their earnings or their sales remained flat. It is these kind of sellers who claim FBA is dead.
BUT, is it? Really?
If you think about it, Amazon FBA is distribution and sales channel. It requires considerable thought, research and planning. It should never be considered to be a get-rich-quick scheme.
If you want to sell on Amazon, you are competing with many other sellers, along with many other products sold for the same purpose.
There is a lot that goes into selling successfully on Amazon, and those who have not considered these things, often fail and later claim the model is dead.
Often, people go into the business model without a full understanding of whats required and what is involved.
These individuals often never took a thorough training course, and simply sold any old product they could find that was cheap, and expected sales the moment they hit the FBA warehouse.
No, Amazon FBA is not dead. It’s growing, and now is the time to jump into this multi-trillion industry.
Will you be successful? You could be, if you do it right. Most people who do not succeed do so from the outset. Or so the old saying goes: fail to prepare, prepare to fail.
Is Amazon FBA Still Profitable?
Amazon FBA continues to grow, with many individuals becoming full-time sellers on the platform year on year. But what is the future?
Well, Google Trends can give us the insights we need. From the chart below, you can see that FBA is continues to expand and is no way slowing down.
As you can see, this is a 16 year trend of positive growth.
This is a business model that is still relatively in its infancy, but offers huge opportunity to any seller whom can capitalize on what it has to offer.
There are no shortages of sellers whom have since replaced their 9-5 by selling on Amazon. You can find a lot of these stories online.
In fact, a lot of business are focuses entirely on Amazon, and abandoning their own storefronts altogether (and making lower margins) due to the growing dominance of Amazon.
Selling on Amazon has become a must for many business in 2020 and beyond.
Ultimately, the statistics show that Amazon, and the FBA model, are here to stay. The future looks promising.
Amazon FBA is not dead; instead its just getting started!
If you hear otherwise, consider who you are talking or listening to; what is their track record, what did their FBA business entail and how did they approach the opportunity?
You’ll likely find they failed; so be careful of what they have to say! Its not a true reflection of the business model. Its all on them.
With Amazon FBA, focus on educating, researching and understanding how the business model works from A-Z.
If you want to start an FBA business, do not be that person who does so without knowing what to do, expect, and being hit or liable later down the line when you hadn’t been prepared or taken important things into consideration.
Amazon FBA sure is not easy, but its a huge opportunity in 2020 and beyond.
The reason why some Amazon FBA sellers have been so successful is that not only do they put in the hard work, but they prepare themselves ahead of time. They know what to do, when and how.
So, if you are serious about Amazon FBA and want to start, I would thoroughly recommend that you get on a well-structured, comprehensive and thorough training course.
Having reviewed many of the different options currently available online, this is the course I would recommend you take a look at.
If you did need more information before you are to begin, then checkout my review first.
Nevertheless, I wish you all the best with your Amazon FBA business. Its a great business model, that comes with many benefits.
Like most things in life, now, is the best time to start.