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Amazon FBA is becoming more and more popular, providing an opportunity to build an online business leveraging the worlds largest eCommerce platform. But is the FBA program worth your time? Can you actually make significant money with the program or are there other factors and considerations that will limit your earning potential?
So, is Amazon FBA worth it? Yes – you can make a significant profit using the FBA program. There are also many benefits to starting including leveraging Amazons sales channels, customer support, warehousing and general brand. However like any online business opportunity, you need to approach FBA strategically with a game plan and be equipped with the right knowledge from the outset.
Having been interested in the Amazon FBA program for many years, I finally decided to take the plunge. To be honest, I was very skeptical of the FBA program to begin with, but overcome my initial fears having spent a lot of time looking for information.
I got started with Amazon FBA at the beginning of this year and I would like to share my experiences with you here today. As you can imagine I also researched the topic extensively before I began so I would like to also share this information too.
I’ll be running you through the pros and cons of the program so that you can see if FBA is right, for you.
Then, I’ll be sharing my Amazon Sellers Dashboard with you and outlining how I’ve been able to scale up my own amazon FBA business successfully, so I suggest you stick around to the end. (If you did want to read this straight way click here).
- 1 Pros of Amazon FBA
- 2 Cons of Amazon FBA
- 3 My Experience with FBA
- 4 In Summary
Pros of Amazon FBA
There are many pros to starting with FBA, but I’ll outline the main ones here.
Consider that there are many more, and there will be more benefits that unfold over time.
Benefit #1: Leverage the Amazon Brand (Largest Global eCommerce Site)
Amazon accounted for 45% of online sales and gross merchandise volume in the US in 2019, and this is forecast to rise to 50% by 2021. They have experienced a huge upward trajectory which continues to build and grow year by year. They are, the online eCommerce platform with sales exceeding $234 billion.
Beyond this, it has a global reach and presence too “the worlds largest online store” according to Bloomberg.
Chances are you shop on Amazon, your friends shop on Amazon and even your parents shop on Amazon.
By signing up to the FBA program you can tap into this formidable, growing and and established brand. Its where customers simply navigate to make an online purchase, wouldn’t it make sense to list your inventory there too?
By listing products on their platform and benefiting from all of the advertising that they conduct to acquire customers. You’ll also gain the trust from the consumer, as many are unaware that they may be purchasing from an individual merchant (seller) as opposed to Amazon themselves.
You can also set your account up to sell on the International Amazon Platforms. This will dramatically increase your potential customer base and help you get more sales, with no extra work on your behalf.
Benefit #2: No Paid Marketing Required
Customer visit Amazon directly; or are prompted to visit the platform through the consistent advertisements that Amazon routinely run across numerous marketing channels.
While you can run paid advertising, and Amazon have an entire advertising platform to leverage, its not actually required. Sure it can help you scale, but initially it does require upfront investment.
Thankfully, a lot of customers visit Amazon directly and use the search bar to find the products they are looking for. Its a search engine in itself.
As long as you are using the right keywords, and are aware of how to research for new opportunities, you can get your products listed right where customers are looking to buy.
Benefit #3: No Customer Service or Postage Required (& Prime!)
This is one of my favorite benefits, personally.
If you have ever sold on platforms like eBay, Poshmark etc or you have run your own shopify store, you will know how frustrating and time consuming Customer Service is. However, you cannot ignore it as this can dramatically affect your feedback, customer satisfaction, retention and ultimately, your sales.
Customer Service is just one of those things that you have to provide if you are looking to sell online.
Or is it?
Using the Amazon FBA program, you are outsourcing this entire process to Amazon. If a customer has any questions or is in need of support, they will contact the Amazon 24/7 support team. Its hands off from your perspective and there is nothing you have to do.
Plus, as Amazon covers this process if there are issues they can get them resolved. This usually means that you are not held accountable to returns.
Sometimes, Amazon will even refund your customer from their own pocket (especially if there was a problem with warehousing, product delivery etc).
Regarding postage, by using the FBA program and sending your products to the Amazon warehouses, you are outsourcing your entire postage processes. Whenever an order comes in Amazon will pick, package and ship the product out to your customer on your behalf.
You will also benefit from Prime, and all of your products will be sent to the customers the same/next day of order.
Benefit #4: Hundreds of Product Niches
Visit Amazon and you’ll soon find that they sell absolutely everything. From Electronics to Baby products, it appears as if there is not a limit to what they sell.
While some categories are gated and protected, you have a massive range of niches that you can enter from the very get go. There are some very lucrative niches with low competition that you can identify and capitalize on.
For those gated and protected categories, you can apply to sell within them. Usually this just involved an application, proof of purchase or proof that you have permission from the manufacturer to sell the product on their behalf. Its an application process, but it is possible to sell even in the most restricted of niches.
The true benefit here is that you can sell products in a niche that you have a knowledge or understanding of. It may be a niche that you are passionate about or that you know common customer pain-points and concerns.
Additionally, you may have a unique way to source products within that niche, maybe you can even create these products yourself or know where to get them at a great and affordable rate.
Benefit #5: Several Selling Options
The term Amazon FBA is often confused and used interchangeably with a range of different selling options.
If you’ve watched any YouTube videos for example, you will hear and see a lot of private labeling (where products are sourced from marketplaces like Alibaba and China) and shipped to Amazon FBA warehouses for sale.
While this is a lucrative option for you, its not the only way.
There are dozens of ways you can acquire product inventory and sell on the FBA program.
Personally, I love Retail and Online Arbitrage (where you find products on discount/offer. You then purchase them up, send them into an Amazon FBa warehouse and sell them for a profit. The benefit here is that you can leverage and sell established products and brands and you know they will sell.
You also do not need to seek out suppliers, manage shipments, create products yourself etc. But, you can only sell what you source and margins and typically lower.
Nonetheless, there’s a lot of opportunity to source inventory with FBA.
Cons of Amazon FBA
Like any online business opportunity, there are always downsides. Do not believe anyone who tells you otherwise. Here are the main disadvantages as I have observed and expressed by others selling on Amazon via the FBA program:
Con #1: Confusing To Get Started and Lots To Learn
When starting with FBA there is so much you need to consider, think about, and plan. You need to work on so many things at once and you need to ensure that you will be returning a profit.
This can be hard in the initial stages, and there are a lot of acronyms, screen interfaces and processes that can throw you off.
You’ll also need to learn how to manage your time, inventory, cash flow and other elements of this business like product listings, product descriptions, niche and product research etc.
As an example and a personal anecdote, when creating an FBA shipment, your packages can get split up into numerous shipments. Unless you know how to send them all to the same fulfillment center, you can spend hours creating extra packages, printing labels and packaging separate shipments. There’s also cost involved. This is the default setting for all FBA sellers and I for one have spent hours and money doing this myself.
However, with time, knowledge and experience you would know that you can change your settings to prevent this from happening and have all your shipments go to one fulfillment center as one package.
While Amazon is an intuitive platform for customers, its not the most user friendly for FBA sellers.
Con #2: Requires Capital Upfront
Amazon FBA, unlike other online business models like Affiliate Marketing, will cost you some money to get set up and started.
For starters, while you can set up and Individual Account, you will likely need a Sellers Account ($30 per month) as the absolute minimum.
You then will need to purchase your inventory, usually in bulk, and will need to wait for that inventory to sell through before you start earning your money back.
Amazon FBA is in many ways, like investing in the stock market. However, with FBA, your shares are actual products and inventory. Once you purchase your products you need to wait a course of time for them to sell through which is when you make your money back and then some.
There can also be a lot of other costs involved, like Amazon &/or product research tools as an example. These tools make it easier for you to learn what to sell, how to create your product lists, and how to target your potential customers more effectively. Unfortunately they come at a cost.
Con #3: Work Involved
Amazon FBA is not a passive income stream. Your profit will be a directly correlated with how much you work. It does require an investment of time. and you can soon find it takes hours a day to manage.
While this should not put you off, you just need to be aware of and understand that with FBA you are starting a business. While you can run it as a part-time business, be aware that you will get far better results with the more time you can apply.
If you are private labeling, you always need to be researching for new products, refining your product listings (or building new ones) and ensuring that your inventory levels are sufficient.
If you are using online/retail arbitrage methods, you need to constantly refine your prices to ensure that you are competitively priced as new sellers come on board to a listing.
Unfortunately, this is not a set and forget business model. There will always be something you need to do.
While the Amazon Sellers App makes this easy for you to do on the go, consider that it also means that you’ll be spending even more time on your FBA business!
Con #4: FBA Fees & Cash Flow
By signing up to the FBA program you will be leveraging Amazon’s selling channels and services, like the customer service and prime postage as already discussed.
However, these things are not free and you’ll be paying FBA fees on each and every transaction you make. These fees differ by product category and from niche to niche, product to product, but they typically are around 10-20%.
This should not be an issue if you take it into your product pricing and costs, but its something you will need to consider. Otherwise it can wipe out profit margins and mean that you are unable to sell like you would have otherwise.
It also makes it more difficult to compete, and you’ll often find that if Amazon are selling a product, you will not be able to undercut them. Your margins would be too small and it would not be worth your time.
Regarding Cash flow, you are not paid the moment a product sells. You need to wait several weeks to ensure the product was not returned.
While this can be frustrating in the beginning, its not usually a problem when you get up and running. You just need to be aware and manage your cash flow wisely
Con #5: Stressful
This may depend on your own personality and temperament, but for me and other Amazon Sellers I have spoken to, it appears to be a quite common.
Selling products on the FBA program can be quite scary and stressful, especially in the beginning. You need to put your trust not only in Amazon, but in certain individuals when you’re making product orders and acquiring your inventory.
You also need to invest a bit up front which can be a new experience for you. You may not be used to ‘risking’ your capital in this way, and you may not even have a lot of spare capital to begin with.
There are a lot of factors outside of your control, and this is particularly true if you are private labeling products.
Organizing shipments, getting them labelled correctly, getting them through customs and delivered successfully to FBA warehouses can be a challenge and can be problematic. It requires that you have your processes and procedures in place at the outset and its important to know what you are doing.
However, it is important to remember that all business carries risk and therefore stress. Its not exclusive to FBA. It just comes with its own unique ones.
My Experience with FBA
I’ve been selling with Amazon FBA for little over 11 months now. The above pros and cons are reflective of this and other FBA sellers I have communicated.
Here is a screenshot of my Sellers Central Account (the Amazon platform and interface that you will use if you sign up to the program)
You’ll notice that I am based in the UK, but the process is the same and the program follows the same principles and methodology.
I’ve earned $1613 (using the current exchange rate) within the last month, and I have only been focusing on my FBA business in a part-time capacity.
Personally, I love the Amazon FBA program and when you consider it to other online business models, its definitely up there as one of the best. When you compare the physical time spent with what you can earn, it provides some of the best ROI out there.
With the growth of Amazon and its upward trajectory, now is the opportune moment to jump on board. Its only going one way.
However, and as a caveat, I’ve made my fair few mistakes and its taken me longer than it should have to start profiting with the FBA program.
If I could give you any advice, it would be to get on a reputable and effective FBA course from the outset, before you begin. This is the course I signed up to and it has been the best decision I have made to date.
Its very in depth with over 270 learning resources spanning 27 modules. It covers the entire business setup, niche/product research, sourcing, optimization and scaling processes.
I’ve written a comprehensive review of the course which you can read here.
There is so much you need to have in place and consider and getting any of this wrong can make or break your FBA business. You can be banned from the program or burn through thousands of dollars.
It just makes sense to ensure you know what you are doing before you order thousands of products from a marketplace in China!
So back to our original question; is Amazon FBA worth it? For me, it has been and there are hundreds of others who have been able to build multi-million businesses using the business model .
While I am not, at this level yet I can see the opportunity and know that it is possible.
Its not easy, there are some drawbacks to the program as you will see above, but on the whole the Amazon FBA program is worth it and it is something I would recommend you take a look at.
Be sure to take a look at the training program recommended because this is the type of business model you do not want to get wrong or go into without the right knowledge behind you.