Is Amazon FBA Worth It? (Plus The Best Amazon FBA Course)
Nowadays, just about anyone can start a business online.
With services like Amazon FBA, there’s an amazing potential for entrepreneurs to start selling products from almost nothing - and scale their businesses at an incredible rate.
Of course, you’ll need to put in hard work to succeed on a platform like this. And it’s not free, either - with the time and investment involved, is Amazon FBA worth it for you? There’s a lot to know about to get started - I’ve researched the basics so you can find out everything there is to know about Amazon FBA.
What Is Amazon FBA?
Amazon FBA stands for “Amazon Fulfilled by Amazon” and is a form of dropshipping. If you’ve never heard the term ‘dropshipping’ before, it’s essentially the following:
You source products to resell as your own
You ship your products over to a shipping center
The shipping center takes care of storing, packing, and shipping your products once you make sales
A dropshipping service like Amazon FBA allows you to scale your business much faster without having to worry about the overhead and logistics of having a large company. Plus, you can very small - no office or warehouse, no employees, and a smaller inventory are all within reach.
But here’s what’s special about Amazon FBA in particular:
They provide customer service for your products, including returns
Your listings are automatically eligible for Amazon Prime Free Two-Day Shipping
FBA products rank better on Amazon than non-FBA products, allowing you to reach a wider audience for your business
You can list your products on multiple channels, not just the Amazon store
So how exactly does Amazon FBA work?
You ship your labeled products over to an Amazon fulfillment center.
The fulfillment center receives your items and stores them in the warehouse.
When you make a sale, Amazon’s employees pack and ship your product to the buyer.
If the buyer makes a return, Amazon handles all of the logistics.
Pros and Cons of Amazon FBA
So now that I’ve piqued your curiosity about this service, here’s what you need to know about its pros and cons before you get started.
Pros
Amazon already has an established reputation and a huge audience of buyers
The infrastructure provides amazing back-end support like inventory management
The Amazon Affiliates program gives an incentive for influencers to link to your products
You get access to perks like 2-day shipping and amazing customer service
Returns are taken care of
You can bundle and multi-pack your items in your listings for more sales
Allows for multi channel fulfillment
Cons
It can get expensive for large, heavy, and/or cheaper items
It’s difficult to estimate at what amount you should keep your inventory because of the high order volume
You have no direct control over the fulfillment
There’s a lot of competition in the marketplace
For part-time sellers, cuts to your profit margin can be too large to be sustainable
It takes patience as well as trial and error to see what works and succeed
Succeeding will also require you to do in-depth market research to figure out what to sell - not just when you start, but constantly
Amazon requires you to pack and label your products individually before delivering them to fulfillment centers
Ultimately, whether or not Amazon FBA is a good avenue for you depends on several factors - whether or not you’re ready (and able) to do constant research, if you are okay with outsourcing the fulfillment of your orders, and if you have a lot of time to invest to see what works and adapt from there.
Fees
If you’re interested in starting your own Amazon FBA business, the first thing you’ll need to know is how much the service will cost you. Although the service will ultimately save you money compared to having your own warehouse and shipping facility, these services don’t come for free, either. Here’s a breakdown of Amazon FBA’s fees:
The Amazon FBA Fee: This monthly fee is basically your subscription and allows you basic access to everything else the service has to offer.
Monthly Inventory Storage Fees: These fees depend on the time of year and your product’s size, and they are defined by how many cubic feet of space your inventory takes up in Amazon’s storage space.
For example, one cubic foot for a standard sized product costs $0.69 between January and September, but the price hikes up to $2.40 per cubic foot between the high season of October and December. And for oversize products, you’re looking at an extra 0.48$ per cubic foot (or $1.20 for the high season).
The Amazon Fulfillment Fee: This is paid per unit and covers picking, packing, shipping, and customer service. This ranges from $2.41 for small products up to $137.32 for special oversize products.
Long-Term Storage Fees: When your units have been in storage for over 180 days, you need to pay a long-term storage pay in addition to your regular monthly storage fees. It starts at $3.45 per month and goes up to $6.90 if your units are in storage longer than 365 days.
Multi-Channel Fulfillment Fee: This only applies if you sell your product on your website or another platform, and you’ll need to cover the cost of shipping.
Referral Fee: Unique to units sold directly on Amazon, this is the ‘cut’ Amazon takes from your sales. The percentage amount depends on your product’s category.
Returns Processing Fee: If your item is part of a category that isn’t covered for returns, you’ll need to cover this.
Stock Removal Fee: When you want to dispose of your unsold inventory.
Inventory Placement Service: This is an optional service that sends all of your units to the same fulfillment center instead of dispersing them throughout several locations.
Amazon FBA Export Fees: If your listing is available outside of the country, you’ll cover the export fees.
That about covers it for the fees you can expect for using the service. Of course, this doesn’t cover the upfront price of the actual products themselves, but I’ll dive into this a bit later.
How to Get Started On Amazon FBA
So let’s say you want to launch your own business on the Amazon FBA platform. Where should you start? The first thing you’ll need is something to sell.
But not all products are made equal - your success as a seller depends almost entirely on the types of products you’ll choose, and at what point in time you sell them.
Types of Products
Usually, you’ll find products to resell under three different categories:
Arbitrage: Low priced products you’ll find on sale either online or in retail stores that you resell for a higher value.
Wholesale: Products you buy in bulk at a lower price, often discounted.
Private Labeling: Also known as white labeling, this type of product will be sourced from a third party and relabeled with your own brand.
What Makes a Great Product?
It’s easy to get lost in the sea of possibilities when it comes to finding a product. But if you want your product not only to sell well but be well suited for your business, you’ll need to watch out for several factors.
The following make great products:
High Demand, Low Competition: By using Amazon’s Best-Seller Ranking (or BSR) available on any product listing’s page, you can see what is currently selling well on the market or not. The lower the BSR, the better it’s selling.
Low Weight: Don’t start off your new Amazon business with heavy products. This will cut into your margin due to higher shipping costs. Start off with smaller, lightweight products.
Stands Out: Your product probably won’t be revolutionary or unique, but it should stand out in some way from what’s already on the Amazon store. A product that fits into a particular niche and attracts a specific audience while being different enough to attract people’s attention is a good fit.
Products that don’t fall under Amazon’s off-limits categories: These categories include specialist/collectible, hazardous/high liability, high-maintenance, and expensive/high quality. In order to sell items in these categories, Amazon requires you to become ‘ungated’ for every separate category. A great product for beginners won’t fall under these.
Even if you find a product that hits all these boxes, there are still a few things to consider before making your purchase.
For instance, is your product seasonal? How much can you sell this product for on the market, and is this price high enough to warrant the fees?
By failing to take all of these factors into account, you could risk losing your investment on a product that has little to no chance of succeeding.
Finding Your Product Supplier
When it comes to online suppliers, you can essentially go two routes: use domestic suppliers or source from China. Each comes with its own set of pros and cons.
Domestic Supplier Pros
The speed of delivery is fast and reliable
No issues with customs and payments
Domestic Supplier Cons
Less choice for products
You’ll usually be required to put in a minimum order
It’s not always possible to private label
You may need business status to purchase from these suppliers
Prices are usually higher per unit
China Supplier Pros
Cheaper products
Low minimum order
Wide array of available products to pick from
No need for a business status
Easy to private label
China Supplier Cons
Shipping takes a long time
Custom issues can arise (products getting stuck, custom fees)
Essentially, sourcing from China allows you to start smaller since you won’t need to order as many products and almost never require business status. However, be ready for unforeseen custom fees and long shipping times, meaning you’ll need to be smarter about managing your inventory. Additionally, the research you put in for your product may be out of date by the time your product arrives.
Domestic suppliers offer quick shipping, meaning you can manage your inventory better, plus you’ll be certain never to run into custom issues. They’re a safer option that comes with less choice and the need for a bigger upfront investment.
One is not necessarily better than the other - it depends on your current situation and which risks you are willing to take.
Calculating Your Return On Investment
Once you think a product might be a good fit, it’s time to calculate whether or not it’s going to make you money.
There are several moving pieces that you’ll need to take into account to make this calculation - it’s a bit more complicated than the cost of units per month and the amount you make per sale. You’ll need to take into account the price of importing, the cost of ads you’ll be running, all of the Amazon fees I’ve mentioned previously, but that’s not all.
For example, a cheaper product that makes more sales will also cost more in shipping than a more expensive item that sells fewer units - it all depends on all the factors coming in together.
Dig deep into your calculations - don’t make the mistake of just estimating what’s at the surface. The last thing you want is to spend hours researching, sourcing, labeling, and listing a product that will ultimately make you close to no money despite making a high number of sales.
Preparing Your Listing
Now you can’t expect even the greatest of products to sell itself. You’ll need to optimize your product listing copy - this single factor can make or break the success of your product.
Write your titles, features, and descriptions in a clear and concise format.
Make sure they include the right keywords to ensure that your product appears in search results. Your customers will be using specific terms to search for the items they want - you need your product to appear in these results!
Not sure which keywords you should be optimizing for? Here are a few tools you can use for keyword research:
Whenever you perform research, remember to record the results so you’ll always have access to this info. The last thing you want is to have to repeat the same research because you forgot to keep notes!
When including keywords in your listing, avoid keyword stuffing - this involves repeating your keyword several times in your listing, making your copy redundant. This can hurt your ranking because Amazon discourages this practice.
Additionally, supplement your listings with high-quality, professional images.
Maintaining Your Amazon Store
So you’ve chosen your perfect product and optimized your listing - now you can just sit back, relax, and watch the money roll in, right?
Wrong.
The last thing you want is to become complacent about your Amazon FBA business unless you want to lose out to your competitors.
The marketplace is constantly changing and you’ll need to keep track of the trends in order to stay on top. By the time your product gets into the hands of your customers, new sellers will have entered the market and change the game.
You’ll need to constantly keep track of your product and re-evaluate how these trends are evolving. This means doing product research on a regular basis, purging old inventory if your product turns out to be a dud, and testing out different products during various seasons.
Despite all the research you can put in, your first products will still be shots in the dark. Keep track of which products are selling the most and go in that direction. Sometimes the product itself is working - sometimes it’s your listing.
Another tip to help you succeed: encourage your customers to leave you reviews for your products! Reviews go a long way for Amazon sellers.
Plus, they’re a great way to track how people perceive your products and your brand. Always track your ratings and troubleshoot your product if you have low reviews.
Wrapping It Up: What You'll Need to Get Started
Now you’ve got everything you need to get your Amazon FBA off the ground. Here’s a recap of all the costs you should keep in mind:
All Amazon FBA platform costs
Product cost and shipping
Logo and branding - this differentiates you from your competitors and makes you stand out from a crowd of generic products
Professional product photography
Inspection services if your supplier doesn’t have a solid quality track record or if you’re selling electronics and/or fragile goods
Your UPC barcode (one per unique listing)
Online tools to support your business (paid product research tools like JungleScout, keyword tools, etc)
Hopefully by now, you have an idea of whether or not Amazon FBA is worth it for you. Whether or not it’s a good platform for your business depends on your specific situation and the risks you are willing to take.
There’s a lot of work involved in getting started and upkeeping such a business, especially when your brand has no reputation, but the scaling opportunities are practically endless. It’s not a get-rich-quick scheme as many make it out to be, but for those willing to roll up their sleeves and do the work, there’s money to be made for sure.
