Whether you are an established Amazon seller, or a fresh-faced business looking to start you might be asking yourself – is Amazon FBA worth it? It’s a fair question of course, no business succeeds without asking itself hard questions about its business models every so often.
After all, Amazon FBA is a highly-used practice that hundreds of thousands of businesses use all over the world – but not all of them. Is Amazon FBM the better option? Do the fees of FBA outweigh the benefits that it entails?
Let’s take a look at the pros and cons of Amazon FBA. If you are an experienced FBA seller, feel free to jump to our pros and cons section. However, for those of you looking for a decent grounding – we’ll start from the very beginning.
A Breakdown Of The Amazon FBA Process
What Makes Amazon FBA Worth It?
Key Differences Between FBA and FBM
Things To Remember About Amazon FBA
So Is Amazon FBA Worth It In 2022?
What Is Amazon FBA?
Amazon Fulfillment-By-Amazon (or Amazon FBA for short) is a service that Amazon offers to its sellers.
The name is fairly self-explanatory, especially when you compare it to the alternative option for third-party sellers, known as Fulfillment-By-Merchant (or FBM for short.) Essentially, you create the products and Amazon takes care of the sales and storage. Or, if you prefer, they fulfill the sale of your products.
Sounds pretty sweet, right? Well, yes! And also no…
There are absolutely benefits to Amazon FBA, some of which line up ideally with your business plan, your profit margins and many more variables. However, there is always a cost. That’s why many businesses choose to remain with an FBM method of service in order to work it to their own business advantage. That’s why every business should routinely ask themselves – is Amazon FBA worth it?
A Breakdown Of The Amazon FBA Process
- Let’s assume that your production line is entirely optimised. You continuously create (or source) your particular product that you want to sell on Amazon.
- You send your products to the Amazon warehouse (or if you source your products from a manufacturer you can arrange to ship your products directly to the warehouse itself.
- Amazon takes care of all the orders, packaging and shipping from their storage facility right to the customer’s door.
- It isn’t really a step, however Amazon will pay you for the sales of your product, while charging commission for their FBA services and any other fees that crop up along the way.
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What Makes Amazon FBA Worth It?
Less Work
Effectively, you actually have less work.
Once your products reach the storage facility – that’s it. All done, finito, ciao. You can focus your efforts on other areas of your business that require your attention. That can be new products, financial security, or just spending a little more time with your loved ones! With a lower workload – the choice is yours!
Prime Customer Access
There are currently over 200 million Amazon Prime members across the globe. Those are members with trigger-happy fingers on the buttons of products every single day. With Amazon FBA you automatically qualify for Amazon Prime and your products are showcased in front of these shopping connoisseurs.
Amazon Buy Box
The Amazon Buy Box is an enormous opportunity for Amazon sellers. So much so, that there are dozens of guides on how to win the Amazon Buy Box. In fact, this particular feature of Amazon accounts for over 82% of all sales made through the platform. This is an enormous advantage to Sellers who are facing a saturated product market.
Brand Trust
Since their founding, Amazon placed a high emphasis on customer service, whether it involves express shipping, easy returns or other services.
With the Amazon FBA logo on your products you are effectively gaining the protection of Amazon itself. Consumers believe in Amazon, therefore they believe in your product. It makes them more likely to follow through with a sale rather than fall out at a sales funnel.
Customer Support
As mentioned, Amazon’s customer support is second-to-none.
So not only does this facet make your products more attractive to customers, but on the rare occasion that customer support gets involved – you have nothing to worry about. Amazon has a dedicated team for handling complaints, dealing with returns, and answering questions. You don’t have any of this pressure. All you have to do is focus on maintaining and optimising your production line.
Inventory Management
Large production, but limited storage space can significantly inhibit certain businesses. If your business suffers from this issue, then Amazon FBA is an excellent choice as it frees you from this restriction.
You can keep a personal inventory within your physical limitations, and store a huge bulk of your inventory at Amazon thanks to their FBA service.
Cons Of Amazon FBA
The Fees
Nothing in this world is free and that is especially true of Amazon FBA.
The two primary fees are
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- Amazon Fulfillment Fees
- Monthly Storage Fees
And each of these will depend upon the size and weight of your products, as well as the sales channels. (View our Amazon Fee Chart for more information!) Other Amazon FBA fees include:
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- Monthly Selling Fees
- Referral Fees
- Stock Removal Fees
- Amazon FBA Export Fees
If you want a full guide to Amazon FBA Fees then we will explain every fee in agonising detail. However, the point stands that these fees add up. In fact, they are the biggest reason why merchants don’t believe that Amazon FBA is worth it.
Lack Of Brand Building
All of your products under Amazon FBA will be branded with Amazon’s packaging. This can undermine your efforts to grow your signature brand if you are trying to cultivate your brand name.
Increased Returns
Amazon Prime members are notorious for making more purchases. It is one of the advantages of being with Amazon FBA. However, thanks to their benefit of free returns with Amazon, they are also the most likely consumers to take advantage of returning items.
Key Differences Between FBA and FBM
By now you should already have a good idea of the key differences between FBA and FBM, as well as a clear picture whether you think Amazon FBA is worth it or not. But let’s summarise the key differences:
With Amazon FBM you, the merchant, are responsible for:
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- Packing each order
- Arranging individual shipping for each order
- Storing existing products
- Providing attentive customer support
With Amazon FBA you, the merchant, are responsible for:
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- Maintaining enough inventory at Amazon’s warehouse facilities
That’s it.
Although it is worth mentioning that financial planning is a key aspect of Amazon FBA. After all, you not only need to accurately calculate your monthly Amazon FBA fees. On top of that, you also need strategic business planning in order to maximise the effectiveness of your stock. After all, if your products don’t sell, they will cost you money just to sit in an Amazon warehouse.
Things To Remember About Amazon FBA
Amazon is an eCommerce giant. While competition is tough, it is also the go-to place for consumers. In fact, 41% of all US eCommerce sales were made through Amazon in 2021. Your compset may be large, but the number of consumers is even larger.
Amazon FBA reduces your overall workload. While the fees can be expensive without prudent business planning, it allows you to focus on tasks that you otherwise may not have a chance to tackle. Whether you want to reinforce your supply chains, or improve on other sales channels, you have the time to improve other key aspects of your business.
Marketing is easy to use with the Amazon FBA marketing tools. While other channels may require significant adaptations to your marketing efforts, you can set up your Amazon marketing tools via your seller dashboard with zero problems. It contains pre-built templates and dynamic widgets so that you can personalise your marketing to your target audience.
So Is Amazon FBA Worth It In 2022?
Essentially the only real downside to Amazon FBA is the fees. Everything else provides a solid advantage to your business. However, you must bear in mind that this is not for all businesses – especially if you are recently starting out.
If your business sells small products at a quick rate, let’s say a minimum of 40 items a month, then Amazon FBA is the perfect choice for you. Alternatively, if your products are large and sell slowly, or your products simply don’t have the sales numbers, then Amazon FBM would be a far better fit (at least for the time being!)
If your business creates vastly different products however, you can register different products for each service. One of your products may be better suited to FBA and the other to FBM, and it is absolutely recommended that you adapt your channels to the products themselves.
Of course, it could be that your products have the potential to be fantastic with Amazon FBA, but for one reason or another, it just isn’t working. Well, luckily for you there are a couple of incredibly versatile tools available for Amazon Sellers.
Amazon Seller Tools
Seller Central Connect is a tool with an entire array of useful business features for sellers. It bulk uploads product catalogues, automatically optimises repricing and synchronises order metrics and customer data. Most importantly, it also comes with a built-in feature to provide a product by product feature of the Amazon FBA fees. These in-depth reports compile all your business metrics and give you the opportunity to make informed business decisions.
While automation is a key time-saving feature, there are some Amazon Sellers who prefer to be more hands-on in their decisions and that’s okay. That’s why Product Finder is designed for those businesses. You can validate potential products by scanning thousands of similar items in just a few keystrokes. Find out the current winning Buy Box price, compare profitability and view a breakdown of all the Amazon fees included. What is unique about this tool is regional isolation – you can plan your expansion into new markets ahead of schedule to maximise your profitability!
With these tools you can secure your sales and scale up your business. Eventually you may become an Amazon Vendor, and then we’ll have even more business tips for you!
Let's scale up your business
We provide effective business tools for Amazon sellers, no matter the size. Gain actionable business reports, automated software and much more with our variety of tools.
Any Questions?
Simply complete the form out down below and our representatives will contact you!
Let's scale up your business
We provide effective business tools for Amazon sellers, no matter the size. Gain actionable business reports, automated software and much more with our variety of tools.
Any Questions?
Simply complete the form out down below and our representatives will contact you!
