Recent years have seen several online sellers make a fortune by selling on eCommerce sites. Since Amazon is one of the leading global eCommerce sites, you may wonder: is Amazon FBA worth it?
Amazon FBA is worth it; however, it requires a decent amount of time and money to start, and contrary to popular belief, Amazon FBA is not a passive income business. It is also currently Amazon competitive.
You can make a fortune by pursuing Amazon FBA, but let’s delve into why.
You might enjoy reading: Is Selling on eBay Worth It? Including its pros and cons!
What is Amazon FBA?
Amazon serves as the world’s top affiliated service, which has its own fulfillment program known as FBA (Fulfillment by Amazon). This service allows individuals and businesses to outsource order fulfillment to Amazon. Individuals and companies send products to Amazon fulfillment centers, and when a customer makes a purchase, Amazon picks, packs, and ships the order. In addition, Amazon provides customer service and processes returns for each order.
If your goal is to start an eCommerce store on Amazon, you may be intrigued by Amazon FBA. This term could be new for many people who only buy stuff from the platform but never sells. When you open an online shop on Amazon, you will decide how your orders will be fulfilled.
If you choose fulfillment by Amazon, it is called Amazon FBA, while the other option is FBM (Fulfillment by Merchant).
So, is Amazon FBA worth it, or is it overrated? This article will take you through the process of starting an Amazon FBA, the cost involved, and the potential return.
How Much Can You Make As An Amazon Seller?
This question is probably the biggest concern for anyone contemplating selling on Amazon. Consider some current statistics on how much revenue sellers generate products on Amazon FBA.
One study from JungleScout shows that 65% of Amazon FBA sellers reported more than a 10% profit margin, and 32% reported more than a 20% profit margin.
The study showed the following:
- 50% of Amazon sellers generate revenue ranging from $1,000 to $25,000 every month
- 13% of FBA sellers sell between $25,000- $250,000 per month
- 22% of FBA sellers generate under $500 of revenue every month.
Amazon has a robust supply chain and huge customer base that many new sellers take advantage of to realize success.
However, some may reason that these are revenue, not profits. True, revenue and profits are different figures. You can generate $1 million in sales, but the profit margin will be significantly reduced if the cost is higher.
Studies also demonstrate that selling via Amazon FBA generates high-profit margins than traditional brick-and-mortar businesses.
Consider the Amazon seller profit margin table below to get a rough idea of how much you will likely make on Amazon as a seller in a year.
|Profit Margin||Percentage of Amazon FBA Sellers|
|Yet to earn profit||6|
The figures show that you can profit with Amazon FBA, remembering that many new sellers use this business as a side hustle gig.
However, it is also noteworthy that approximately 6% of sellers are yet to make any profit, with 9% not knowing whether their businesses are profitable or not.
Reasons Why Amazon FBA Is Worth Your Time And Efforts
Besides the profits you will earn by selling on Amazon, you also have some valid reasons to start your online store on the platform.
1- Many Consumers Rely On The Platform For eCommerce
Amazon is undoubtedly the king of the eCommerce marketplace, controlling approximately half of the market share. It has continued to change consumers’ shopping and searching behavior, with many people (71%) using the platform to search for product information than Google.
We are all victims of turning to product reviews and prices on eCommerce sites before deciding whether to buy or not. Amazon makes this process straightforward because it has centralized information consumers want.
So, if you have more excellent reviews, reliable fulfillment service, and competitive pricing, you will likely make huge sales within no time.
2- Amazon’s Seller Fulfilled Prime Tools And Features Encourage Delivery
If you are still wondering if Amazon FBA is worth it, you should consider FBA’s business model that helps brands to scale and grow. Amazon FBA business will take care of your Amazon fulfillment needs, and your customers will receive prime offers like same-day or two-day shipping.
The platform also launched the Seller Fulfilled Prime program, designed to help you meet consumer demand satisfactorily.
As a seller, you will also enjoy automatic product classification, shipping region automation, and delivery speed reports. These features will ensure you rarely experience consumer dissatisfaction and negative reviews.
3- You Have Shipping And Delivery In One Place
Operating a successful eCommerce business needs different moving parts managed from multiple platforms. But Amazon FBA takes several responsibilities off your shoulder, including shipping, delivery, and part of marketing.
You can now focus your energies on product creation, stock supply, and brand building.
Tip: FBA business setup works better for new sellers with smaller, easy-to-sell products. As you build your brand through positive reviews, maintain a list of loyal customers.
4- You Do Not Need Outside Marketing
Marketing stifles many start-ups, which takes a considerable chunk of the budget. However, you do not need outside marketing to showcase your brand since you can use the FBA marketing tools.
You can use Amazon seller tools to promote your products through:
- Sponsored brands
- Sponsored products
- Supported stores and displays.
The built-in templates and widgets will help you create customized advertising to reach your target audience.
5- Amazon FBA Provides You With a Clear Scalability Path
Once you have established your Amazon FBA business, you can aim for growth. You can use all the excellent tools on the platform to help you promote deals and coupons, optimize your products, and improve sales during high seasons.
Furthermore, you have set up a dynamic FBA dashboard; you can take your products to other channels to expand your consumer reach.
For instance, you can focus on product familiarity and brand alignment to increase your brand’s popularity across the Amazon platform.
6- Return Management System
Retail returns rose to an average of 16.6% in 2021 compared to 10.6% a year ago, according to a survey issued by the National Retail Federation.
The good news is that when customers order through Amazon FBA after receiving the product if they dislike the product, they can simply choose to return it through their online return centers.
Amazon FBA will handle returns for you, allowing customers to safely return their products on time. The customer doesn’t have to face any sort of difficulty with reverse logistics.
Returns are frequently a staggering assignment for online merchants, however critical to a general fruitful online experience.
7- Amazing FBA Handle Customer Support For You
Amazon not only stores, packs, and sells our products but also provides excellent customer service. Customers have the facility to get in touch with the Amazon FBA service. They have their contact number.
Amazon provides them 24 hours customer support via phone or email, whether it is day or night, allowing you to focus on scaling your business.
The complaints can be dealt with on the first attempt, and customers don’t have to spend hours and hours fulfilling their requirements. Fulfillment By Amazon FBA has excellent customer service and return management service, increasing the number of customers daily.
See also: Is it Safe to Start an Online Business?
How To Start Amazon FBA
Amazon FBA is an excellent tool to help you solve fulfillment issues as your business expands. Here is a procedure on how to start a successful Amazon FBA business.
Step 1: Set up FBA Account
If you have thought hard about selling on Amazon, you must create an Amazon FBA account by logging into Seller Central. You will choose a suitable plan- an individual for $0.99 from every sale or a professional program for $39.99 per month, regardless of the number of items you sell.
When you want to sign up, ensure you have the following:
- Business email address
- Government identification card
- An internationally chargeable credit card
- Phone number
- Tax information
- An active bank account
Step 2: Create Product Listings
Once you have created an Amazon FBA account, you begin by adding your Amazon catalog. You should ensure the products in your store have high demand because choosing the wrong products can lead to tied-up capital and losses.
So, take your time and brainstorm, conduct market research, and explore supplier options to enhance your profitability.
It may be a case of a trial-and-error method before you finally settle for a suitable niche. And with research and brainstorming with your social media and blog audience, you will have an ideal product listing for consumers.
Step 3: Prepare Products
The next step is to know where the products will come from. Most US sellers source their products outside the country to make a sustainable profit margin because they are relatively cheaper.
However, if you must source products in the local area, visit tradeshows hosting upcoming suppliers. You may contact a supplier offering the same products you want to sell.
Product preparation also involves securing safe transportation to the fulfillment center. You may ask yourself: can you afford to source the product by air, boat, road, or train?
Be acquainted with the rules governing methods of shipment. Transportation by train is often preferred if your products go over long distances.
Step 4: Market Your Product
Although Amazon FBA has a good marketing platform, you can complement these efforts by marketing your product on your social media pages and blogs.
It is not enough to pick excellent products; ensure you optimize them by posting quality pictures and writing compelling copy to help your audience know why they should buy.
Optimize the product titles and alt texts by using trending keywords. Including keywords in the descriptions will enable potential customers to find your products quickly.
Step 5: Ship Products To Amazon
It is vital to have a proper shipping plan to help you fulfill your orders promptly. Therefore, print your Amazon shipment ID labels for packaging and send the products to Amazon fulfillment centers.
Keep an inventory of your listed products and indicate when they are out of stock; otherwise, you will meet with angry customers because of delayed delivery.
Is Amazon FBA Hard?
The hard part is setting up the Amazon FBA account and marketing, which could take time and money. However, things can be pretty simple once you learn the ropes and plan ahead.
Amazon FBA does the shipping of the product to your customers, making it hassle-free. Nevertheless, you must spend time and learn shipping standards to avoid unnecessary mistakes; otherwise, you may lose good worth a fortune.
Is Amazon FBA Worth It?
Although Amazon FBA is competitive, it is worth it. True, it requires substantial money and time to set up and run, but with persistent and good planning, Amazon FBA can be your gold mine.
Like most businesses, Amazon FBA requires constant learning, hard work, and adapting to change. Not all sellers launching products on Amazon will enjoy success, but if you are disciplined, put in the position, and learn from your mistake and that of others, you will surely succeed.
People have succeeded in selling stuff on Amazon, and you are no different.