February 22

Is Amazon FBA Worth It?

One of the most popular options when selling online is using Amazon’s fulfillment option, known as Amazon FBA.

This option has several pros and cons that you should weigh before you make the decision to use this method.

This article will outline the Amazon FBA process, give you unbiased pros and cons, and an honest review of whether or not it’s worth it.

 

 

Should You Start an Amazon FBA Business?

What is Amazon FBA?

 

 

 

FBA stands for fulfilled by Amazon. It’s essentially a program where sellers can send their products to an Amazon warehouse for storage.

As customers order the products through the Amazon website, Amazon will package the products, ship them to the customer, and handle any returns.

It’s a streamlined process that makes it easy for sellers to run their business.

Basically, you ship the products to Amazon and collect the money when the products sell. Amazon handles everything in between.

So the question is, if the program is so simple, why doesn’t everyone do it? The simple answer is that it’s not for everyone.

Once you’ve met all the requirements, registered, and have sent products, that’s when it gets easy.

However, registering and learning the ropes is not a walk in the park. Plus there are additional fees associated with selling through FBA.

These are the considerations that could deem selling through FBA worth it or not worth it.

 

Quick Pros and Cons of Selling Through FBA

Pros:

  • Offer Prime shipping to your customers.
  • You won’t need to hire help to fulfill your orders.
  • Items that are fulfilled by Amazon sell faster.
  • Amazon handles customer service and returns on your behalf.

Cons:

  • Additional fees required for selling through FBA.
  • It can take a couple of weeks for Amazon to get your inventory checked in.
  • Packaging rules are much more strict.
  • You’ll need to have lots of inventory on hand (rather than drop shipping).

The next sections will go into detail about the biggest considerations of FBA.

The ease of doing or dealing with the concern will be rated on a scale of one to five stars with one being very difficult and five being very easy.

 

What You Should Consider About Amazon FBA

 

Amazon FBA 00

 

Eligibility for the FBA Program – ★★★★★

While the FBA program is open to all sellers, there are some requirements that you must meet to join the program.

Most sellers meet these requirements right away as long as they aren’t selling hazardous or restricted products.

In general, make sure your account is in good standing as far as customer feedback is concerned and you’ll likely be eligible.

The product restrictions are common sense and are mostly the same restrictions for the platform no matter what method you use to sell.

However, the warehouses do have some limits with size and, of course, you can’t sell anything illegal.

There is no minimum quantity of goods you must sell in order to be eligible for the program.

However, once in a while Amazon may limit how many of a specific product you can send to the warehouse.

The limit is usually ample, so you don’t have to worry about being restricted too much for quantity.

Fees – ★★

Nothing good in life comes free.

That includes the use of the FBA program. Amazon already charges commission fees for selling through their platform.

However, if you send your products in for fulfillment by Amazon, they charge additional FBA fees. Unfortunately, these fees can be high depending on what you’re selling.

Keep in mind that FBA fees don’t replace the commission fees that Amazon charges. They are in addition to these fees.

The FBA fees are calculated based on the size and weight of your products.

Regular Fulfillment Fees

First, you must determine which category your products fall in: standard non-apparel, standard apparel, or oversized (apparel and non-apparel).

Then, you weigh the product and find the associated fee for an item of that weight in the associated category. That will be the fee associated with your product.

As of the date of this article, the minimum fulfilment fee for an non-apparel item is $2.50 and the minimum fulfilment fee for apparel items is $2.92.

These prices are for fulfillment from facilities located in the United States.

The maximum fee is a bit more difficult to pin down – once your item reaches a certain weight, Amazon charges you the base fee plus an additional charge per pound over three pounds.

Packaging Fees

Amazon requires your products to be packaged a certain way before they can be FBA.

For example, every single apparel item needs to be packaged in a poly bag that contains the suffocation warning on it, then the ASIN barcode must be affixed to the polybag in some way (stickers recommended).

If it’s a set, the set can be packaged in the same poly bag, but the same rules still apply.

If you do this before you send your products to the Amazon warehouse, there is no fee. However, you can elect to have Amazon do this for you at a per-item packaging charge.

Storage Fees

The next fee is the warehouse storage fee. The first 90 days of storage is free. If your products sell within that 90 days, there is no storage charge.

However, after 90 days, Amazon charges a small storage fee per item. They then charge that fee each month.

The fee is based on daily average volume your products take up in the warehouse. They also have categories for this: standard size and oversize.

The fee also varies depending on the season. From October through December, the storage fee more than triples.

They also have a long-term storage fee in addition to the monthly storage fee. If your items have been in the warehouse for more than 365 days, they will be subject to this fee.

As you can see, these fees can accumulate quickly. The fees associated with selling through FBA are the biggest reason many sellers opt out of the program.

Better Sales – ★★★★★

Amazon is the global leader in online sales, so being a seller on Amazon already gives you a sales advantage.

Can you imagine boosting your sales even more than what Amazon already offers?

Customers are 30% to 50% more likely to make a purchase if the product is fulfilled by Amazon. This is a huge increase – one you don’t want to leave on the table.

One of the biggest reasons for this increase is the Amazon Prime program. Most people are already familiar with this program, especially if you’re a shopper or seller on Amazon.

In case you aren’t, this is a program that Amazon offers to it’s shoppers. It’s a membership; shoppers can pay a low monthly or annual price and get a whole host of member-only benefits.

One of these benefits is free two-day shipping on select products.

So, how does this affect you as a seller? People are much more likely to purchase a product online if the shipping cost is free.

However, the only products that are eligible for Amazon’s Prime’s free two-day shipping is…you guessed it! Products that are fulfilled by Amazon!

There is a special exception to this known as seller-fulfilled products that are eligible for Prime shipping, but Amazon has closed this program to new applicants with no indication of when or if they’ll reopen it.

The good news about Amazon Prime is that if your products are FBA, you don’t pay anything additional for them to be shipped free (not exactly, more explained below).

Customer Loyalty and Trust – ★★★★★

If building customer trust and loyalty (especially in the form of good reviews) is your priority, there is no better way to do this than through the FBA program.

Customers know that their products are guaranteed when they order a product that’s fulfilled by Amazon. They have protections in place for the purchase that makes customers much more comfortable with buying these products.

If you are a new seller, I recommend using FBA to build your good reviews.

Having your products at an Amazon facility essentially ensures that the customer will receive a good product and an on-time delivery.

This isn’t to say that you can’t offer that on your own, but you reduce the risk of running into delivery problems by allowing Amazon to handle your shipments.

After all, it’s not likely that you have a large infrastructure designed for delivery like Amazon does.

Huge On-Hand Inventory – ★★★

If you plan to participate in Amazon FBA, you can forget about drop shipping. You’ll need to have the products on hand to send to Amazon.

For many sellers, this is a big turnoff, especially if they don’t have the money to invest in a huge inventory. For the small entrepreneur, this might be impossible.

Another consideration for this is if the products don’t sell.

You’ve already seen the list of storage fees that Amazon charges, so if your products don’t sell it may be more cost-effective to have them removed from the warehouse.

In this case, you may end up with a bunch of inventory on-hand that you now have to figure out what to do with.

Lowered Labor Costs – ★★★★★

If your business doesn’t have employees or you can’t afford to hire a lot of employees, you won’t need to if you use Amazon FBA.

Amazon has the infrastructure and employees needed to do high-volume shipping. Using their FBA program essentially means you don’t need to have warehouse employees.

Not only will this reduce your payroll costs, but it will reduce insurance costs as well as any costs associated with compliance laws.

You don’t have to worry about warehouse safety, productivity, and other warehouse concerns. Amazon takes care of all of this for you.

You can run your business on your own from your computer. Of course, this doesn’t have anything to do with employees for other areas of your business.

 

 

So, is Amazon FBA Worth It?

If you average all the star ratings from the sections above, Amazon FBA gets 4.2 stars out of five. This is a pretty good rating if you’re into that. However, it may not depict the whole story.

There are certainly more pros than cons when it comes to having your inventory fulfilled by Amazon.

However, this depends on what you’re selling and how much of it you’re selling. The biggest section was about fees, and that’s because they are the biggest consideration.

Let’s face it – Amazon charges a lot of fees for FBA.

If you’re selling cheap items or items that don’t turn over quickly, you could be setting yourself up to go into debt.

You simply won’t be able to make a profit with these items because the FBA fees would eat it all up.

Even if you wanted to do FBA just to build your brand and get reviews, I still wouldn’t recommend it.

At the end of the day, business is about the bottom line and if you don’t do FBA right, your bottom line will be in the red.

On the other hand, if you have a product with a high profit margin or products that sell like hot cakes, you can make some good money with FBA and save yourself the headache of running a warehouse.

When you count up all the fees, in the long run you would be paying less than you would if you had your own warehouse and several employees.

The bottom line is this: with the right products, Amazon FBA is worth it. Do some research, make sure you select the right products, and go for it.

There are over 197 million potential customers that could be buying your products every month.


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