Are you running an eCommerce business?
Are you, like many others, relying upon Amazon customer fulfillment operations to do so?
If so, the burning question of 2023 is this: is Amazon FBA worth it this year? Specifically, is fulfillment by Amazon (FBA) a profitable endeavor for sellers right now?
This year, more and more businesses are looking to capitalize on Amazon’s success by selling products through its platform. Yet numerous challenges come with doing so; from stringent product requirements to counterfeits and customer service issues. Understanding these issues is key to succeeding on Amazon FBA, as well as avoiding risks like being banned.
In this article, we’ll be answering the question of if Amazon FBA is worth the stress. We will also examine what it takes to make a profit from Amazon FBA in 2023. This includes the common pitfalls that prevent sellers from doing so.
With the information presented in this article, you can make an informed decision on whether or not you should get into Amazon FBA in 2023.
What is Amazon FBA?
Amazon FBA (Fulfillment by Amazon) is a service offered by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. With FBA, you take advantage of Amazon’s world-class logistics network to store, pick, pack, and ship your products to customers.
FBA offers several benefits to sellers. With Amazon FBA, you can:
- Store and track your inventory at their warehouses
- Have their staff handle your packing and shipping
- Have their customer service teams handle your returns
- And on top of everything, your product comes with Amazon’s stamp of approval!
Current Problems with Selling on Amazon & Why Sellers are Quitting
While Amazon is a great platform for selling products, it’s not without its challenges. In fact, a recent decrease in sellers has some questioning the long-term viability of selling on Amazon. To understand why this is happening, it’s important to examine some of Amazon sellers’ major challenges.
Here are the two most common problems that sellers run into when it comes to selling on Amazon:
1. Saturated Market
One of the biggest issues that sellers face is the fact that Amazon’s marketplace has become increasingly saturated. Currently, there are 6.9 million Amazon FBA sellers globally. This can make it difficult for individual sellers to stand out from the crowd, leading to fewer sales and lower profits.
2. Rising fees and costs
Amazon charges fees for its services, including FBA, referral, and storage fees. These fees have increased in recent years, making it more expensive for sellers to store and sell their products on the platform.
3. Terms of Service
Like any large business, Amazon has various policies, agreements, and guidelines that must be followed. This, however, can be difficult to keep up with as the company updates its rules and regulations frequently.
For instance, in 2017, Amazon changed its returns policy to require sellers to accept returns for any reason within 30 days of purchase. This change made it more difficult for FBA sellers to manage their inventory and led to increased costs for some.
5 Reasons Why Most Amazon FBA Sellers Fail
The most burning question for aspiring Amazon FBA sellers is whether or not it’s worth investing in the platform. Is Amazon FBA profitable enough to make a living? Is fulfillment by Amazon worth the effort and costs involved? Especially when you consider the current problems that come with Amazon FBA selling, as mentioned above.
Well, regardless of these problems, many people have been successful at selling through Amazon FBA. This is because they avoided some pitfalls that would have otherwise wrecked their Amazon FBA business.
Here are five common reasons why most Amazon FBA sellers fail:
1) Not doing their due diligence
Many new FBA sellers don’t take enough time to research their products and market before setting up shop on Amazon. Without a thorough, competitive analysis or reliable suppliers, it’s hard to create a successful business in such a crowded space.
It’s imperative to keep a close eye on your analytics and notable changes over days, weeks, and quarters. Take note of what’s working and what isn’t, and adjust your business strategy accordingly.
2) Poor pricing strategy
Many sellers make the mistake of trying to compete on price alone. Meanwhile, they forget to factor in the cost of shipping and any other expenses associated with the product. This often results in them setting prices too low to make a profit.
Your product or service is worth something. Don’t undervalue yourself or your work in costs or hours of labor. Lowering your prices to undercut the competition can seem like a smart plan, but a proper pricing strategy is a better investment in the long run.
3) Ignoring regulations
Amazon FBA is subject to many regulations which vary from country to country. Sellers need to be aware of these rules – failure to comply could lead to hefty fines or even account suspension.
Take the time to read through Amazon’s terms of service, and check in every quarter to reevaluate if possible. You’re placing your business in the hands of a massive corporation that oversees an ocean of other companies. Just as it’s on them to keep everything organized, it’s on you to understand how that system works.
4) Not utilizing Seller tools
There’s a range of services and tools in the market that can help streamline operations and improve sales performance. Such tools include optimizing pricing, tracking customer trends and reviews, monitoring competitors, advertising, and so on.
Sellers who don’t take advantage of these miss out on potential benefits and could find themselves falling behind the competition.
5) Poor customer service
Amazon places a high value on customer satisfaction, and FBA sellers must provide timely and effective customer service to maintain good ratings and avoid penalties.
Rest assured that burnout is very much a reality with major impacts on your business; eCommerce or otherwise. Moreover, it’s an inevitability if you don’t pace yourself and seek help.
Take note that your first profits can lull you into a false sense of security, a sense that more work means more pay. But more often than not, this plateaus until growth is made. You try to be the CEO, VP, marketer, copywriter, IT, and package handler all in one. But you can’t juggle all these duties if you’re going to cultivate success at any point.
So if you’re considering using FBA, keep in mind that managing a contract with Amazon is a full-time job in itself. It’s a lot for one person to handle on top of leadership duties, so outsource it if you can.
Ultimately, understanding what can lead to failure is an important step in ensuring success when selling on Amazon FBA. Take note of these five common pitfalls and avoid them at all costs. Then it’s smooth sailing toward long-term profitability!
How to Succeed in Your Amazon FBA Business
Understanding Amazon’s terms of service and taking full advantage of its efficient fulfillment network, are key ingredients for success. Before you decide to become an Amazon seller, however, there are a few things that you should consider:
1. Have a business strategy
Before you start anything, you need to know exactly what you want from selling on Amazon. Some people get into Amazon FBA only to realize they cannot cope with the fees or the stringent regulations for Amazon FBA sellers.
In this case, perhaps Amazon FBM might be the one for you. So it’s important to do your due diligence so you can have the best strategy that works for you. A good place to start is our Amazon FBA vs FBM article. It will help you decide if you should go with Amazon FBA or FBM.
2. Understand the fees involved
Amazon FBA comes with associated fees that can range from listing fees, fulfillment costs, storage fees, promotional expenses, etc. So it’s important to understand these upfront before you make a decision.
3. Research the competition
Do some research on existing sellers in your industry and find out what they’re doing right and wrong. Focus on your most successful competitors and get an understanding of their pricing, product offerings, and customer service processes. Then use what you learn to capitalize on a winning strategy that set yourself apart from the competition.
4. Differentiate yourself from competitors
Speaking of setting yourself apart from the competition, try to look for ways to differentiate yourself from competitors. You can do this by offering unique product bundles.
For example, if you sell kitchen gadgets, consider bundling a set of your most popular items together at a discounted price. This can help you stand out and attract more customers to your listings.
5. Start small
Avoid biting off more than you can chew by starting small – focus only on one or two products at first. Then gradually scale up as needed once you have established a foothold in the market.
6. Build relationships
Take advantage of the community aspect of selling on Amazon by building relationships with other sellers and customers. You can visit online forums on Reddit or on Facebook. This can help increase your sales and provide valuable feedback for improvement.
7. Invest in marketing
Develop a comprehensive marketing plan to make sure your products are visible on the platform. This might include sponsored ads or influencer marketing campaigns, etc.
8. Don’t forget customer service
Providing great customer service is key to success as an Amazon FBA seller. Make sure you are responsive and take care of issues quickly and efficiently.
9. Monitor the data
Take advantage of the vast array of analytics tools available through Amazon to constantly assess your performance. Make adjustments as needed, such as pricing or positioning changes. Also, monitor reviews and customer feedback regularly to ensure that your product is up-to-date and competitive in the market. Make changes as necessary or develop new versions if needed.
10. Utilize Amazon Seller tools
Amazon seller tools can help you succeed in the Amazon FBA business. These tools provide you with valuable insights into your business performance, help you research your competitors and products, and help you optimize your listings for maximum visibility and sales. Even Amazon provides tools within its Seller Central platform to help sellers succeed. Check out our compilation of the best Amazon seller tools to get started on your FBA journey.
11. Keep learning
Stay up-to-date with industry trends and news so that you can stay ahead in the competitive eCommerce marketplace. Sign up for newsletters from other businesses or attend conferences to network and learn more about what’s working for competitors.
A good place to start is the Ecom Circles newsletter. You can sign up for our newsletter to get the latest news, updates, and trends in the Amazon and Walmart selling space.
Amazon FBA FAQs
What is Amazon FBA PL?
Amazon FBA PL is a program that facilitates sales through your online store. With Amazon FBA, you can create and manage listings, orders, and shipping labels, saving time and money on shipping.
You’ll also have the support of Amazon’s Seller Consultants, who can work with you to troubleshoot blockage and bolster sales. All you need to start is a seller account!
Is Amazon FBA worth it for new sellers?
Amazon FBA can be a good option for beginners who are looking to start an online selling business, as it offers a number of benefits. You have access to Amazon’s large customer base, reduced shipping times, and the ability to offer Prime shipping to customers.
Additionally, using Amazon FBA can help beginners and new sellers streamline their operations and focus on growing their business rather than worrying about packing and shipping orders. However, it is important to understand the costs and regulations involved to truly succeed as a beginner,
Can you start Amazon FBA with no money?
Starting an Amazon FBA business with no money is unlikely as there are several costs associated with selling on Amazon. These costs include product costs, shipping and handling fees, Amazon seller fees, and other expenses.
However, it is possible to start with a relatively small amount of capital and gradually grow the business over time. If you have little capital, start with a few products in a low-competition niche and gradually expand as your profits roll in.
How much money can you make with Amazon FBA?
The average monthly revenue for Amazon FBA sellers is around $50,000, with the top 10% of sellers making over $100,000 per month. However, it’s important to note that these figures are not representative of all Amazon FBA sellers and are likely influenced by a number of factors such as product selection, marketing efforts, and overall business strategy.
Ultimately, The amount of money that Amazon FBA sellers make can vary widely depending on factors such as the type of products they sell, the pricing strategy they use, the level of competition in their market, and the amount of effort they put into their business.