FBA (Fulfillment by Amazon) can best be described as “you sell it, Amazon ships it”. By leveraging its vast logistics network, Amazon increases its market share, you build your business using the largest e-commerce platform, and your customers get your products in their hands with no fuss. It’s win-win-win.
Just like with any other online business, you should do extensive research and preparations before taking the plunge. However, the amount of profit you can make through the Amazon FBA program might be hampered by different factors. You need to create a strategy from the get-go to avoid catastrophic errors.
I’d also strongly recommend reading our is Amazon FBA still profitable piece as well, after reading this one.
So, is Amazon FBA still worth it? Here’s the scoop.
- 1 So, Is Amazon FBA Still Worth It In 2020? – The Benefits
- 2 The Downsides
- 3 My Experience With Amazon FBA
- 4 Amazon FBA Tips and Tricks
- 5 Is Amazon FBA Worth It? My Final Take
So, Is Amazon FBA Still Worth It In 2020? – The Benefits
Amazon FBA promises to take the workload off of your shoulders. I too was skeptical when I first heard it, so I did a ton of reading and research. All that information helped me further down the line when I decided to scale up my business.
What I found is that Amazon FBA allows almost anyone to start a business, grow quickly, and reap profits with relatively little work. All of this thanks to five major benefits over traditional brick-and-mortar businesses.
Benefit #1 – A massive marketplace with a global reach
Amazon represents half of all e-commerce in the US and the platform is slowly getting even more market share. In 2019, Amazon moved $234 billion worth of goods. By selling on Amazon, you’re tapping into this market and getting a chance to build your own business.
Those numbers up there? They’re only for the US, and seeing how Amazon has a global reach, you can expand your business internationally with no extra work. Now we’re cooking with gas.
Benefit #2 – Zero marketing required
Starting a business usually requires months of marketing, which costs money up front but provides no immediate return. On Amazon, there’s zero marketing required though you can buy it if you want. Amazon has advertising systems but the most important one is up top—the Amazon search bar.
By learning how to use the right keywords to get listed in the search results, Amazon will do the marketing for you, funneling customers to your product page. There is a learning curve and you’ll have to do research to stay in the game, but that’s about it.
Benefit #3 – Selling options
There are at least a dozen options for selling on Amazon. I love the Online Arbitrage option, where you find items sold at a discount, ship them to an Amazon FBA warehouse, and collect the difference. Margins are below average but there’s still money to be made.
Benefit #4 – Product niches
It’s no joke, Amazon really does sell everything from A to Z. Want a cat-shaped cool-mist humidifier? Amazon’s got it.
As you explore niches, you’ll come to realize the most popular niches are also the most competitive. To get in one of those gated niches, you’ll have to claw your way up the ranks. However, some niches are obscure but just as lucrative.
This idea of making a fortune on selling obscure, niche items is called the long tail. Traditionally, the only problem with the long tail is the lack of a distribution channel, which is now handily fixed by Amazon FBA.
If there’s a niche where you have inside knowledge or where you understand the customers’ pain points, you can make a killing just by selling a few items each month. If you’ve also got a unique way of sourcing these items, you’re set.
Benefit #5 – No customer service or postage needed
Customer service is a huge hassle for any business. You have to spend too much time dealing with all the customers because just one bad review going viral is enough to tank your business. Packaging, shipping, and postage problems are another major hurdle when starting and scaling up a business.
If you’re wearing several hats, you can’t afford customer service and postage unless you’ve got Amazon FBA. When Amazon does your customer service and postage, you don’t have to worry about returns or customer complaints. If Amazon messes up, it foots the bill and you’re off the hook.
You also get the benefits of Amazon Prime, meaning same-day or next-day shipping, which customers have come to rely on.
There are plenty of hidden dangers when starting Amazon FBA. All it takes is one of these to slide by you and tank your business.
Downside #1 – Stress
From my research, working with Amazon FBA comes with a planet-sized ball of stress. Unless you know how to manage stress, it’s going to get to you and cause you to slip up. Almost all the Amazon sellers I know of say the same thing in so many words: “the stress is killing me”.
The root cause is that you’ll be dealing with a lot of unknowns as you’re starting out. You’ll be placing your trust in Amazon and third parties, which will make you feel like you’re losing control. That’s unavoidable and while you can minimize risk, you can never completely eliminate it.
Just labeling the shipments correctly is a science and an art form rolled into one. Then add organizing them through customs and getting them to Amazon FBA warehouses and you can see why all the stress.
What about the few Amazon Sellers that don’t feel stressed out? They either have a mentor walking them through the process or attended a course that guided them through Amazon FBA. The lesson I learned is that Amazon FBA is not something you dive into and expect to work out. You’ve got to be prepared.
Stress lowers the quality of life, and we don’t even notice it. You can make a successful business while stressed out but you risk burning out and losing your passion. If you can make a business and avoid stress, I suggest you go for it, no matter the dollar cost.
Downside #2 – Plenty of nuances
You can’t plan too much before starting out with Amazon FBA. Once you get the ball rolling, things will start developing very quickly and you’ll have no time to think. If you haven’t picked up the nuances before the start, you’re toast.
I found the Amazon FBA acronyms to be the most confusing. At times, it felt to me like I was being pranked, that’s how many shorthand names I had to learn. Add in all the different interfaces and you’ve got a hodge-podge of acronyms, buttons, form fields, and sliders.
But, that’s the power of Amazon. Knowing how to split up your shipment in multiple packages and having Amazon route them all to a single fulfillment center saves time and money. And it’s extremely satisfying. Learning the nuances means you get Amazon working for you, not the other way around.
So, why would Amazon split one shipment to multiple fulfillment centers? That’s the default setting and plenty of Amazon Sellers have no idea it exists, let alone how or why they should change it. Unless someone tells you about it, like I just told you, you’ll be lost too.
Amazon makes things easy and intuitive for customers but lets sellers sink or swim. If you can find someone to teach you all the nuances of using Amazon, go for it and you’ll be skipping ahead of the pack.
Downside #3 – Upfront investment
Amazon FBA is not free. You’ll have to make at the very least a Sellers Account, which is $30 a month. You’ll need some capital to buy inventory and only when you’ve sold it will you be able to make your money back.
The biggest problem I found during my research is people investing in the Sellers Account and getting an inventory, only to realize they have no idea who’s supposed to buy their product. Of course, Amazon will lend a hand and provide market information, at a cost.
Again, this idea of doing your research and getting informed before you start Amazon FBA comes to the forefront. Information rules the market and if you’ve got the latest scoop, you can dominate any given niche with ease.
It helps if someone’s done the research for you. Successful Amazon sellers I came across would get together and share information, which helped them beat the system. You can make it solo, but there are tons of people out there that did the research already. Just go and find them.
Downside #4 – Work hours
Amazon FBA is not a “set it and forget it” type of project. You’ll have to be actively involved with everything, and the more hours you sink in, the greater the return. This can make you feel like you’re working for Amazon.
Depending on the settings you use and how much tweaking you want to do, you can easily spend up to 16 hours a day researching product listings and optimizing your product offers. With the Amazon Sellers App, you’ll find yourself working almost anywhere.
Amazon is a jungle, and like all jungles, it’s a cutthroat environment. There are many opportunities to nab something juicy but there’s no guarantee you’ll make a killing. With new sellers constantly coming online, you’ll have to keep refining your products or drop down the Amazon search results.
Still, it’s possible to work part-time and get at least something out of Amazon FBA. The more efficient you are at using Amazon, the less time it takes to get a return on the time you’ve invested. If you have someone to show you the ropes, definitely take their advice.
Downside #5 – Fees and cash flow
The two biggest gripes among all Amazon Sellers regarding Amazon FBA are fees and cash flow. Unless you know how to manage your cash flow, the fees will nibble away at your profit margins and you’ll end up not really empty-handed but feeling like you’re working for peanuts.
Amazon FBA takes a 10-20% fee on every transaction and, although these fees vary slightly depending on the product niche, you will have to consider them in the long run. You need to be able to calculate your profit margins and figure out if something’s worth your time.
Managing your cash flow so you stay afloat is the secret of success with Amazon FBA. The money doesn’t go straight to your bank account once a customer buys your product; it takes a couple of weeks to get the cash in your hands.
My Experience With Amazon FBA
I pretty much grew up using computers and gadgets, so I found it fairly easy to learn about Amazon FBA. When I tried explaining the idea to my friends and family, I saw their eyes glaze over and realized, “there should be a course to really ease people into it.”
After a lot of (re)searching, I discovered the Amazing Selling Machine Course, where you’ll learn how to start an online business from A to Z and do it with a smile. The course was made in 2013 by two guys from Texas, Jason and Matt.
The two are successful entrepreneurs that realized the potential in Amazon FBA and made millions selling through it before starting a masterclass course to ease people into it.
The Amazing Selling Machine Course lasts for 8 weeks. During it, you’ll get tips and tricks, mentorship by one of the elite sellers that went through the course, access to the course community, and the Private Resource Vault with contact information. That’s enough to give you an Amazon FBA jumpstart.
I made a comprehensive review of the Amazing Selling Machine Course that goes over all the nitty-gritty of it. To sum it up, the hardest part of Amazon FBA is getting started, and the course handles that expertly.
Amazon FBA Tips and Tricks
During my research, I found a couple of Amazon FBA tips and tricks. I thought it would be a shame for them to go to waste, so here they are.
Pricier items fare better
While everyone is racing to undercut the competition by a couple of cents, you can sell a few pricier items and save money on fees in the long run. There’s a market for premium and deluxe items and it can be very lucrative.
Focus on one goal at a time
Trying to do a dozen things at a time means you’ll probably fail at all of them. Instead, focus on one achievable goal and get on it. This will also reduce the amount of stress you’re experiencing.
100% review score is unrealistic
You might be tempted to achieve and maintain a 100% review score but that’s not feasible. There are cranky and grumpy customers out there, and Amazon makes it all but impossible to remove their negative or even neutral reviews. Don’t fret about reviews unless they show a pattern.
Make product bundles
When you bundle products, you get a chance to stand out from all your competition and also cut down on fees. Do follow Amazon’s bundling guidelines, though.
Use browser extensions
You’ll be spending a lot of time in your browser, clicking through Amazon and hunting for offers. Use the official Amazon Assistant for Firefox (free) or Keepa for Chrome (limited trial version with a premium subscription) to have all the data in one place.
Don’t let your inventory sit
Amazon doesn’t want sellers clogging its warehouses with products that aren’t selling, so it charges fees and tanks the Inventory Performance Index (IPI) of sellers that let that happen too often. If you can’t move stock, consider selling stuff through Amazon on other e-markets, like eBay.
Own your product
Reselling is good for starters but you want to eventually make your brand and sell your own product. In this way, you get a lot more freedom and much more control over how the product is being sold. Your customers will follow your brand, no matter where you take it.
Is Amazon FBA Worth It? My Final Take
Once I started researching Amazon FBA, I fell in love with just how much it empowered me to become independent. I can turn what is essentially a hobby into an income stream. For me, that meant I gained a whole new level of confidence and serenity.
Knowing that I can quit my job, move anywhere, and still have a financial lifeline thanks to Amazon FBA has broadened my horizons in a way I never thought possible. Not just that, but I’ve started thinking globally. The entire world is a marketplace and there’s an opportunity for everyone.
I also caught myself saying things like, “The Polish supplier has closed down for the weekend due to national holidays”. Amazon FBA really made me feel like a boss wrangling his international crew. The best part is all the Amazon FBA knowledge applies globally, no matter where you live.
Whether you do Amazon FBA or not, I think that gathering knowledge is the way forward. The more knowledge you get, the better your life in every conceivable way. There are plenty of scoops on Amazon FBA out there, so that was mine, in hopes you use it well.