If you’re considering selling on Amazon, you might be wondering “is Amazon FBA worth it?” It’s a valid question! There are pros and cons to using Amazon Fulfillment that you need to consider before making the jump.
I personally started selling on Amazon about a year ago. I had done my research and knew that it was something I could make some extra money with so I decided to give it a try. Overall, I’ve been really happy with the results. Yes, there have been some challenges along the way but overall it has been a positive experience. One of the things I love about selling on Amazon is that they take care of fulfillment for me.
As someone who works full-time outside of the home, this is huge! Not having to worry about packaging and shipping orders frees up so much time for me. And because customers receive their orders quickly and reliably from Amazon, they tend to be very happy which leads to good reviews (and more sales!).
But, is Amazon FBA worth it?
What is Amazon FBA?
Fulfillment by Amazon allows third-party Amazon sellers to effectively outsource their packing and shipping to Amazon. With this service, sellers can sell their products and Amazon will handle all shipping, returns and (if necessary) refunds. This makes it easier for sellers to focus on selling their products and leave the shipping to Amazon.
If you’re enrolled in Amazon FBA, you can take advantage of their shipping services – including returns and refunds – as well as product warehousing in their warehouses. This way, you can focus on selling while Amazon takes care of the rest.
You can either send your products to Amazon to be stored and sold, or you can allow Amazon to handle the sales and just make sure they always have stock. Either way, they take care of the rest.
And, yes, you will have to pay fees to Amazon Web Services to use their servers.
So, what do you actually get for your money?
For a monthly fee, you can take advantage of Amazon’s world-class customer service and fulfillment network. This includes picking, packing, and shipping costs – so you can focus on selling your products.
Most consumers are aware that Amazon has one of the largest online stores in the world.
So, what should you do?
First, this platform has a long history, dating back to the early days of the internet. It has evolved a lot since then, and it now includes a wide range of features. However, it does have some drawbacks, which we’ll discuss next.
As an employee of a software company that specializes in multi-channel e-commerce, I’ve seen many businesses improve their profits by taking advantage of FBA. New merchants and existing ones alike have seen their profits increase by outsourcing their fulfillment to a third party.
Fulfillment by Amazon can be a great opportunity for people to get involved in online sales and marketing. It provides a marketplace for sellers to reach buyers on Amazon and other channels. FBA can help sellers grow their business, reach new customers, and scale their operations.
In 2020, nearly half of all Amazon sales came from third-party sellers, not Amazon directly. This is especially true for sellers using the FBA platform, as about 23 of those sellers utilize it.
What some people don’t realize is that just about anyone can sell something on Amazon. You just need to know where and how to do so.
Now, more than two million businesses all over the world are doing it, and it’s now up to you to determine if it’s right for your own business. And Amazon Fulfillment by Amazon (FBA) works in countries all around the world.
The Amazon FBA Program (a brief history)
Amazon has paved the way for online shopping, but it wasn’t until 2006 that the company launched its Fulfillment by Amazon program.
The company’s founders saw a need to help others in 1990 and they have been dominating the online selling and fulfillment industry since then.
It’s not entirely altruistic on Amazon’s part to offer fulfillment services to small businesses – they’re making money from it too.
Amazon has now decided to offer its services to small business owners, giving them access to its shipping and customer support services.
The brand hoped to teach third-party sellers how to become profitable by using Amazon’s methods.
The ever-evolving world of e-commerce can be both a boon and bane for those enrolled in Amazon’s Fulfillment by Amazon (FBA) service. On the one hand, it’s simple to stay abreast of the latest trends and demands. On the other, it’s challenging to keep up with the ever-changing guidelines and processes of the program.
Staying up to date with the constantly changing guidelines and trends of the telemarketing industry can be a daunting task. But, it’s important to stay up to date in order to remain competitive.
In our guide, we cover everything you need to know about the Amazon Fulfillment by Amazon (FBA) Program, including its potential future.
How do I learn to sell on Amazon?
Although there is a learning curve to becoming efficient at Seller Central, it’s hardly surprising that a third of Amazon sellers report that they need more training, and a quarter are confused about how the selling process works on the platform.
Selling products on your own website can be intimidating, with 26% of business owners concerned about competition and 33% worried about how to actually sell their products.
How Much Money Should I Start With?
If you want to start making money right away, then starting your own branded products may not be the best route. Instead, consider selling items at retail prices through sites like Amazon or eBay.
Bootstrapping is a great option to start fast.
Bootstrapping (this means that you invest a small amount of money and then continue to re-invest) or investing personal funds can be a good way to start a business.
Credit cards and loans can be risky for new sellers because if they purchase poor inventory, it may be difficult to pay back what is owed. It’s important to do your research before making any big purchases so that you don’t end up in a difficult financial situation.
Having said that, it’s not uncommon for sellers to borrow money from a family member or receive some type of business loan to start. In fact, 17% of sellers have borrowed money from a family member and roughly 12% have received a business loan.
How long did it take for them to start making money?
While it can take 2+ years before an Amazon seller makes money, 20% of successful merchants report making profits in less than 3 months of starting their business.
It’s not all that difficult to start making a profit through Amazon, but it’s not a “Get Rich Quick” scheme.
This is not always the case for sellers, as some may take a bit longer to start seeing profits when launching their brand. However, with dedication and hard work, it is possible to see a return on investment in a timely manner.
17% of respondents said it takes 3-6 months before turning a profit, and 16% said it took them 1-2 years before they could turn a profit. This is typical for a private label product that is launching.
Sellers, don’t be afraid to spend a little money on promotions and advertising to help get the ball rolling on your listings. A few dollars spent now could mean a big payoff later.
How Much Time Does It Take to Sell on Amazon?
31% launched in less than 6 weeks!. If you want to be successful selling on Amazon, you need to put in the time. Consistency is key, and with it you can launch your first product within three months – just like 54% of other Amazon sellers have done. 31% even managed to do it in less than six weeks!
31% of startups launch in 6 or fewer months.
Don’t worry if it takes you a little longer to get your Amazon business up and running – 14% of sellers took 6 months to a year. Just go at your own pace and do what makes you feel most comfortable.
Do what feels right for you and what makes you feel most comfortable.
How much time do you spend on your business each week?
If you want your business to run smoothly, you’ll need to put some time into managing it – but it doesn’t have to be a lot. Utilizing FBA could help you spend less than 10 hours per week on your business, like 39% of other sellers do.
When you first start selling on Amazon, you will probably have to spend more time on it than you would like. 16% of sellers report spending 21-30 hours per week on their business, while 17% have gone full-time and are working nearly 40 hours or more. However, once you get your business up and running, you can reasonably expect to spend less than 10 hours per week managing it if you use FBA to handle all order logistics.
The amount of time you invest in your startup business depends on your goals for it.
If you’re interested in learning more about what it takes to sell on Amazon, our State of the Seller Report is a great place to start.
The Costs of FBA
Now, let’s get to the money. It will cost some money, but it won’t be a fortune.
When considering the costs of FBA, it’s important to remember that Amazon charges fees based on size and weight, not cost. This means that selling items with small price tags may not be as profitable as others. Choose the items you list (or don’t list) with intentionality.
Be thoughtful about what you list on the FBA platform – consider what will sell and what won’t.
Amazon has storage fees for your inventory, and the longer you store it, the more it will cost you. They also have a 180-day rule, which encourages sellers to keep items moving through their warehouses.
If you have inventory that is stored at an Amazon warehouse for longer than 180 days, your costs will increase. This encourages people to get and keep products moving.
In addition to tracking items for sale, Amazon has another tool called “stranded” that shows you how much product you have in storage and aren’t selling.
You can see how much you’re paying for your Fulfillment by Amazon program in the Reports section. This will show you what kind of fees are being assessed.
Remember, you’ll pay more for Amazon to store your stock during high demand times like the holidays. Be sure to double check your listings for anything you won’t move.
Now is the time to double check your FBA listings for anything that may not sell. This way you can remove it and save on costs.
There are a few costs associated with selling on Amazon, but there are also some factors that help determine the final price. Amazon has done a good job of providing information and assistance to sellers, so they’re pretty transparent.
How much do Amazon sellers make?
How much profit can be made by selling on Amazon? This is a question that every new seller asks. Let’s take a look at some stats on what current sellers profit from selling products on Amazon FBA. Nearly 85% of them have reported being profitable on Amazon.
Let’s take a look at some (sales) numbers for (month):
Amazon sellers make a lot of money! 50% of them bring in more than $5,000 per month, and 25% of them make more than $25,000 per month. In addition, 50% of Amazon sellers have reached over $50,000 in lifetime sales, and 19% of them have earned over $1 million in lifetime sales.
Monthly sales Percentage of Amazon sellers Under $500 17% $501-$1,000 9% $1,001 – $5,000 20% $5,001 – $10,000 13% $10,001 – $25,000 12% $25,001 – $50,000 10% $50,001 – $100,000 5% $100,001 – $250,000 5% More than $250,000 6% I don’t know 4%
While selling physical goods online is far from a new concept, many recent entrepreneurs are finding success with it thanks to the power of the Amazon.com marketplace.
Yes, the revenue figures are impressive, but what is the profit margin?
I know that revenue doesn’t always reflect the success of a business.
You could make a million dollars in sales, but if your costs are more than that, you’re not making any money.
Compared to physical stores, online retailers such as Amazon.com have much lower operating costs.
Many online business owners, such as those who sell on Amazon, have much higher margins than traditional brick and mortar stores. In fact, 68% of merchants selling through Amazon has margins of 10% or higher, while 36% of vendors have 20% or greater. 20% of those who have an Amazon store have earned over $100,000 in profit.
Many new sellers start this venture as a side hustle and it is not too bad considering that.
If you want to get a full financial picture of your business, you can use a tool like Sales Analytics to track your performance. This will help you understand your profits and losses so you can make informed decisions about your business.
More people are shopping online, and most of them start their product searches on Amazon. This steady demand for online shopping has led to more competition on Amazon and other eCommerce platforms.
Selling products through Amazon’s Fulfillment by Amazon (FBA) program can still be profitable in 2022.
So, is Amazon FBA worth it?
Yes, Amazon is competitive. It takes a lot of work and money to start, and it’s not a passive business.
Working with Amazon FBA can be a very rewarding experience. It requires a lot of learning and hard work, but if you are willing to put in the effort, it is definitely worth it.
In our opinion, the pros of selling on Amazon far outweigh the cons.
No seller is guaranteed success on Amazon, but if you’re willing to put in the work and learn from your mistakes, you can be successful.
It’s not difficult to do. Why can’t you do it?
Would you like to know any more about selling products on Amazon FBA? Let us know in the comments!
Conclusion
So, is Amazon FBA worth it? Overall, I would say yes! If you’re looking for a way to make some extra money and are willing to put in the work, selling on Amazon can be a great option. Just be sure to do your research beforehand so you know what you’re getting into. And if you have any questions, don’t hesitate to reach out to me or another experienced seller for help.
