Whether you are a fresh-faced startup business, or an established business reassessing its business efforts, you will always end up asking the question – Is selling on Amazon worth it?
Obviously, every Amazon Seller does pay to sell their goods via Amazon. You can’t get something for nothing after all, but do the profits make up for the fees? Does the increase in potential customers balance out those extra charges that crop up?
The easy answer could be that it is a simple case of your business model – if your business model aligns with the Amazon Seller concept, then everything is a piece of cake! If not, maybe Amazon isn’t the right choice.
Or perhaps your business model isn’t the problem. You may simply lack the correct knowledge of how to make the most out of Amazon Seller Central – it is a complicated world after all. The correct strategies can make an enormous difference between a profitable business and a failing one.
We may have ourselves in a bit of a muddle here, but let’s start from the beginning and see if selling on Amazon is worth it.
More Than An eCommerce Platform
When we say that Amazon is big, it is probably not the correct word. Gigantic, enormous, and gargantuan would probably be among the right lines. The issue is that in an online world it is easy to underestimate the intangible size of their reach and market coverage.
To comprehend the sheer scale of their operations is impossible, but to give you a brief idea of the data available on the company.
- More customers begin their product search on Amazon than on Google.
- Amazon ships 1.6 million packages a day.
- That’s 66 thousand packages an hour.
- That is 18.5 packages a second!
- That’s 66 thousand packages an hour.
- Amazon has over 150 million Amazon Prime members.
- Third-party sales grow each year at an average of +52%.
With this in mind, it means that becoming an Amazon Seller also means competition. Thousands of businesses jostling for a competitive position in the market. But is selling on Amazon worth it with so many vying for top spot?
The answer is simply to play it smart. That’s what we’re here for.
Should I Pay For Amazon FBA?
Let’s get one thing straight – you do not have to pay for Amazon FBA to become a successful Amazon Seller. Your business model may not be set up in a way that aligns with Amazon’s FBA program, and that’s okay. You can elect for fulfillment-by-merchant (FBM) instead.
That being said, it can be an incredibly useful tool for Amazon Sellers. Amazon FBA effectively eliminates a huge amount of the “boring” side of running your own business. While they take care of the drudge work, you can focus on what you love.
In other words, to make selling on Amazon worth it, it’s not about choosing one option over another – it’s about choosing the right option for you!
So let’s take a look at your two options – FBM or FBA.
Fulfillment By Merchant – FBM
If you choose to go down the FBM route there are a few things that you should be aware of. As an FBM seller you are the one that must:
- Pack and prepare each order.
- Arrange individual shipping.
- Store existing products and maintain inventory.
- Provide customer support.
The method of selling on Amazon is absolutely fine if your business either sells individual, expensive products with a huge profit margin, or you don’t expect to make that many orders in the beginning.
However, if you have hundreds of orders rushing in – then it becomes a huge headache. You wind up spending more time packaging, preparing and delivering than you do making your products. Goodbye inventory!
Fulfillment By Amazon – FBA
Fulfillment by Amazon means that you will be responsible for shipping bulk orders of your items to an Amazon warehouse – and that’s it. Obviously Amazon FBA fees do come into play, but it takes away a huge amount of the work for you and your business.
We’ve already prepared an in-depth guide to Amazon FBA Fees for you, but we’ll do a (very brief) summary for you down below.
Monthly Storage Fees
This the “rent” that you pay for using an Amazon Warehouse facility. Your particular fees will vary on both the volume of your inventory and the size and weight of each particular product.
The more space they take up in the warehouse – the more you pay every month. (Check out our detailed product tier chart showing the costs according to dimensions and weight)
As the name suggests, these fees cover the FBA aspect of your business. Your products incur a fee every time a customer purchases your item. This is to cover the cost of locating, packaging and shipping each unit.
These fees also cover customer service – so it’s another worry off your plate.
Returns Processing Fees
When you list your items with “free return shipping” you offer customers an incentive to buy. The majority of the time, it won’t be an issue, but on the rare occasion that a customer does return an item, someone has to cover that cost – and it won’t be Amazon.
Long-Term Storage Fees
Amazon makes more money by selling your stock than it does in monthly storage fees. If your products are gathering dust in their warehouses – that is valuable space that could be used for another seller or for better-selling items.
If you find that you have items sitting in an Amazon warehouse for over a year, you’ll be hit with long-term storage fees on top of everything else.
Stock Removal Fees
This can be done to avoid long-term storage fees, or for any number of other reasons. If you want to reclaim your stock back from the Amazon warehouse (potentially to make space for a better selling product) then you will have to pay for Amazon to return it to you.
Is Selling On Amazon Worth It With Amazon FBA?
The world of Amazon FBA might seem like an endless stream of possible fees, however there will be some that will likely never apply to you as long as you monitor the interests of your customers closely.
Not only that, but Amazon FBA Sellers are ranked higher on the product listings than FBM sellers, which usually correlates to more sales. It’s a small price to pay to be featured on the largest place for online sales in the entire world.
In addition, Amazon FBA also vastly increases a third-party seller’s chances of winning the Amazon Buy Box (yes, that’s some more reading for you to do before you start becoming an Amazon Seller!)
What Else Is Needed To Make Selling On Amazon Worth It?
Know yourself and know your business model, and Amazon is absolutely a worthwhile sales channel for you and your business. However, that only comes with careful consideration and planning for all aspects.
For example, Amazon FBA is a great way to work as an Amazon Seller – but not if you fail to account for the fees involved. It takes time and attention to calculate product profitability and ensure that your future business practices remain viable.
That’s why we created Seller Central Connect. It’s the tool for Amazon Sellers that allows them to outperform the competition and optimise their work processes. Bulk upload your entire inventory and catalogue in an instant. Automate repricing to maximise your chances at winning the Amazon Buy Box. Synchronise your data and receive in-depth reports to analyse your most profitable trends and chart a course for your most successful future.
It is one of our favourite products alongside Product Finder. This unique product profitability tool allows businesses to measure their products against thousands of the competition at once. It compensates for different Amazon fees, and provides the optimum Amazon Buy Box price available for you!
Being an Amazon Seller is a difficult job, but we are always here to help. Whether it’s the cutting-edge online business tools we offer, or our resources and guides – we have something for every business. ontact a member of our team for more personalised advice or enquiries!