Although the eCommerce industry changes rapidly every year, one thing that has stayed the same over the years is that Amazon is one of the best-selling platforms. This platform has helped many online sellers change their lives in many ways. One typical way is Amazon FBA. This is a fulfillment program in which Amazon will take full responsibility for shipping your items. However, are you wondering, “Is selling on Amazon FBA worth it“?
In this article, we will answer these questions by analyzing some of the following factors:
- Time and effort
- Amazon FBA costs
- Shipping performance
- Fulfillment control
- Sales volume
- Amazon FBA privilege
Let’s thoroughly check each aspect!
Fulfillment By Amazon: The Fundamentals
To know whether Amazon FBA is worth it or not, it is necessary to know the nature of FBA. Let’s learn about Amazon FBA now!
What is Amazon FBA?
Fulfillment by Amazon (FBA) is a convenient service provided by Amazon that enables you to delegate your order fulfillment tasks to them. By joining Amazon FBA, you can send your products to their widespread network of fulfillment centers, enabling you to offer customers the benefit of free, two-day shipping through Amazon Prime.
With FBA, Amazon’s dedicated fulfillment specialists handle order picking, packing, and shipping tasks. Additionally, they handle customer service and manage returns for these orders.
Here’s how it works:
- Sellers send their inventory to Amazon’s fulfillment centers.
- Amazon stores the products in their warehouses.
- When a customer finishes placing an order, Amazon takes care of selecting, packaging, and delivering the product on behalf of the seller
- Amazon also handles customer service, including returns and refunds.
Using FBA offers several benefits to sellers, including:
- It allows sellers to leverage Amazon’s reputation and reach, increasing visibility and sales.
- FBA provides access to Amazon Prime customers, who enjoy fast and free shipping.
- Sellers can save time and effort by outsourcing the logistics and customer service aspects of their business to Amazon.
Amazon FBA vs. FBM: What Is the Difference?
Along with Amazon FBA, Amazon FBM is among the two most popular fulfillment methods for sellers on this top eCommerce platform. Amazon FBM is where you store, ship, and handle customer service for your products yourself. You can ship products directly from your own warehouse, home, or other location.
There are a lot of differences between Amazon FBA vs FBM. Let’s see the table to get to know these differences:
Feature | FBA | FBM |
Storage | Amazon stores your products in their fulfillment centers. | You store your products yourself. |
Shipping | Amazon ships your products to customers. | You ship your products to customers yourself. |
Customer service | Amazon handles customer service and returns. | You handle customer service and returns. |
Fees | Amazon charges a fulfillment fee and a monthly inventory storage fee. | You pay for shipping and other costs associated with fulfilling orders yourself. |
Pros | Convenient, fast shipping, Prime eligibility, Amazon handles customer service and returns. | More control over inventory and costs, can offer custom shipping and packaging options. |
Cons | More expensive, less control over inventory and costs. | More time-consuming and complex, less visibility into customer experience. |
Amazon FBA is also different from dropshipping, check out our detailed comparison between Amazon FBA vs Dropshipping.
Is Amazon FBA Worth It? 5 Factors to Evaluate
To conclude whether “is selling on Amazon FBA worth it?”, we need to evaluate a number of factors, specifically as follows:
Time and effort
Firstly, time and effort are crucial factors to evaluate when deciding whether “Is Amazon FBA worth it.” Obviously, compared to Amazon FBM, Amazon FBA is a better choice for sellers who don’t have much time and resources to pack their own goods. When using Amazon FBA, you are hiring Amazon to fulfill your orders. Amazon stores your goods in the fulfillment center, packaging, and shipping the order to your customer. Even if a problem occurs and the customer wants to return the item, Amazon will help you handle it.
Amazon FBA reduces your logistical headaches. However, that doesn’t mean you don’t need to participate in delivery processes at all. You still need to take your time to pack and ship your items to Amazon. This process will indeed take a lot of time because Amazon has specific requirements for packaging and labeling. At the same time, you also need to continuously maintain your warehouse in an available state not to affect the delivery time to customers.
Regarding time and effort, yes is the answer to “ Is FBA on Amazon worth it.” Although it still takes some time to send your goods to Amazon and maintain an available warehouse, Amazon FBA essentially frees you from worrying about delivery issues.
Amazon FBA costs
Along with time and effort, the cost is also a factor that no seller can ignore when considering “Is Amazon FBA worth it?” as the cost will directly affect their final profit.
First of all, let’s discuss the costs you may have to pay if you fill your order yourself, including:
- Shipping: The shipping costs will be adjustable depending on the package’s size, weight, and destination.
- Storage costs: You must pay to buy or rent storage space if you don’t have one available. The more orders your business has, this cost will obviously increase due to the larger storage area you need.
- Customer returns fees: When a customer returns a product, you, as the FBM seller, are responsible for covering the costs associated with the return. This includes any shipping or handling fees incurred during the return process.
- Additional fees: There can be additional Amazon seller fees that you need to consider when fulfilling by merchant on Amazon. These can include fees for services such as advertising, product listing enhancements, and fulfillment-related services like Amazon’s Multi-Channel Fulfillment (MCF). The specific fees will depend on the services you choose to utilize and can vary based on your business needs.
So what happens when you choose Amazon FBA? Amazon FBA is a service provided by Amazon, and as a service, there will definitely be a fee. The Amazon FBA costs depend on several factors, including your chosen plan, fulfillment costs, inventory storage costs, and returns processing. As follows:
- Plan selection: There are two plans to choose:
- The Individual selling plan costs a flat rate of $0.99 per item sold.
- The Professional selling plan costs $39.99 per month.
- Fulfillment costs: Fulfillment costs are based on your items’ weight and product category. The exact cost can vary, so using the Amazon Revenue Calculator to estimate these costs is recommended.
- Inventory storage costs: Inventory storage costs are based on factors such as the space you’ll need and how long you’ll want to store your products. Amazon charges fees for aged inventory kept in their fulfillment centers for over 365 days.
- Returns processing: Amazon FBA also handles returns processing, which can save you time and effort.
To determine “Is selling on Amazon FBA worth it or not?”, you’ll need to carefully analyze these costs and compare them to the potential increase in sales and the time savings you gain. For some businesses, especially those with high-margin products or those looking to scale quickly, the convenience of FBA may outweigh the costs. However, the Amazon FBA seller fees may erode profitability for others, especially those with lower-margin products.
You can utilize the Amazon Revenue Calculator to estimate Amazon FBA seller fees, and find out how much you can save with FBA.
In short, the cost is challenging to conclude whether “Is Amazon FBA worth it?” because there are so many different fees. Furthermore, these fees can be large or small depending on the scale and type of goods you trade. Therefore, to know “Is Amazon FBA profitable?” you need to calculate and give your answer.
Shipping performance
Shipping performance, in other words, shipping speed, is the next factor you must consider when evaluating “Is Amazon FBA worth it?”.
With the FBA program, your products become eligible for Amazon Prime, which offers free two-day shipping to Prime members. This can enhance your product’s visibility and appeal to customers who prioritize fast delivery.
Additionally, Amazon has a wide network of order processing centers everywhere. Therefore, your product will be placed in the center with the most appropriate location to reduce shipping time and costs.
On the contrary, if you are responsible for shipping yourself, ensuring your order will reach the customer quickly or slowly won’t be easy. Why? Because this process depends heavily on the shipping unit you choose, there will be shipping units with fast shipping speeds and units that work quickly.
However, Amazon FBA shipping, whether fast or slow, sometimes depends on the speed at which you send the goods to Amazon. Therefore, you need to handle this step quickly if you want shipping to be a worth-it factor for the answer “Is it worth selling on Amazon FBA?”.
Fulfillment control
One of the potential drawbacks of using Amazon FBA is that it involves relinquishing a degree of control over your fulfillment process. When you send your products to Amazon’s warehouses, they take over the storage, packing, and shipping. While this can be a relief for many businesses, it also means you have less direct control over these crucial aspects of your business.
For some businesses, maintaining control over the fulfillment process is essential. This control can allow you to offer unique packaging, personalized inserts, or more specialized handling of your products. If these elements are vital to your brand and customer experience, you might find Amazon FBA less appealing. As a result, in this situation, you may say no to the question, “Is fulfillment by Amazon worth it?”
However, it’s worth noting that Amazon has stringent quality control measures in place, and they are known for their efficiency in order fulfillment. So, while you may have less hands-on control, you can generally rely on Amazon to meet high standards and provide a seamless customer experience.
Sales volume
Next, the potential increase in sales volume is a significant factor to consider when evaluating “Is Amazon FBA worth it.” Many businesses turn to FBA to tap into Amazon’s vast customer base and leverage its Prime shipping benefits. The FBA program offers access to Amazon’s global marketplace (Read the article Amazon vs Amazon marketplace comparison to know thoroughly about the marketplace). This enables you to expand your reach and tap into international customers.
It sounds very attractive, but in reality, Amazon FBA does not always bring value in terms of sales volume. In some cases, the associated costs of FBA may be relatively high compared to the sales volume you receive. Thus, even with high sales volume, your bottom line profits will differ from what is expected.
In short, if we consider “Is fulfilled by Amazon worth it in terms of sales volume,” yes. However, not all cases are worth it. Therefore, you need to analyze sales history and do market research to make the most suitable choices for your store.
Amazon FBA privilege
Privilege is the final factor we need to notice to conclude, “Is Amazon FBA worth it.”
Amazon FBA offers a unique privilege to sellers: the opportunity to participate in Amazon Prime. As mentioned above, Prime is Amazon’s premium membership program, offering benefits like free two-day shipping, exclusive deals, and access to streaming content. Also, Prime-eligible products are more likely to win the Buy Box, the coveted placement on product detail pages that can result in higher sales.
Besides, being part of the Amazon FBA program can also give your products access to programs like Amazon Pantry and Subscribe & Save. This further increases your sales potential.
These privileges can be challenging to achieve if you handle your own fulfillment or use a different fulfillment service. Therefore, in terms of privilege, clearly, yes is the answer to the question of whether is fulfillment by Amazon worth it or not.
How to Start An Amazon FBA Business?
At this point, you probably have your own answer to “Is Amazon FBA worth it?”. If Amazon FBA offers a lot of value for your store and becomes one of your eCommerce strategies best practices, you may need to know how to start with it. We are here to guide how to start an Amazon FBA business with these steps:
- Create an Amazon Seller Account: In order to begin selling on Amazon, you must first establish an Amazon Seller Account. There are two options available: Individual and Professional. The Individual account is designed for individuals who anticipate selling less than 40 items per month, whereas the Professional account is intended for those who plan to sell more than 40 items per month.
- Source products: Once you have identified your product niche, you must source products to sell on Amazon. Various sourcing methods include wholesale, Amazon FBA private label, and arbitrage. The process of wholesaling entails the direct acquisition of products from manufacturers or distributors. The private label consists of creating your own brand and having products manufactured. Arbitrage involves buying products at a lower price and reselling them on Amazon for a profit.
- Prepare and ship products to Amazon: After sourcing your products, you must prepare them for shipment to Amazon’s fulfillment centers. This involves labeling, packaging, and creating shipping plans. Amazon provides detailed instructions on how to prepare products for shipment, including requirements for packaging, labeling, and shipping labels. You should read this guide carefully to ensure you do not make any mistakes in any action.
- Send products to Amazon’s Fulfillment centers: Once your products are prepared, you can ship them to Amazon’s fulfillment centers. Amazon will store your products, handle customer orders, and provide customer service.
- Optimize product listings: Thanks to Amazon handling all the logistics, you have more time to care for your listing. Thus, it’s time for you to optimize your product listings to increase sales. The optimization includes writing compelling product titles, and detailed descriptions, using relevant keywords, high-quality product images, and so on.
- Monitor and manage your business: Once your products are live on Amazon, monitoring and managing your business is essential. You need to keep track of your inventory levels, sales performance, and customer feedback. Continuously analyzing and optimizing your product listings, pricing, and marketing strategies will help you stay competitive.
Is FBA Worth It: FAQs
- Is Amazon FBA really profitable?
Yes, Amazon FBA may be profitable for sellers. By using FBA, sellers can take advantage of Amazon’s extensive logistics network, which includes:
- Storage
- Packaging
- Shipping
- Customer service
This can help improve the efficiency and reliability of order fulfillment, leading to increased customer satisfaction and potentially higher sales. However, profitability depends on various factors such as:
- Product selection
- Pricing
- Competition
- Marketing strategies
Sellers need to carefully analyze costs, including FBA fees, storage fees, and other expenses, to ensure that their profit margins are sufficient.
- Is Amazon FBA good for beginners?
Yes, Amazon FBA (Fulfillment by Amazon) can be a good option for beginners in eCommerce. It provides a streamlined process for inventory storage, packaging, and shipping, allowing sellers to focus on product selection and marketing. With FBA, sellers can leverage Amazon’s trusted brand and extensive customer base. However, beginners should carefully consider costs, competition, and market research to ensure profitability. It’s important to understand the requirements and benefits of FBA before getting started.
- How much does the average Amazon FBA owner make?
The average income of an Amazon FBA (Fulfillment by Amazon) owner can vary widely depending on various factors such as product selection, pricing, competition, marketing strategies, and overall business performance. While some sellers may achieve significant profits, others may experience more modest earnings or losses. It’s important for FBA owners to carefully analyze costs, optimize their listings, and continuously adapt their strategies to maximize profitability.
- How much can Amazon sellers make?
The income potential for Amazon sellers can vary greatly depending on various factors such as product selection, pricing, competition, and marketing strategies. While some sellers may achieve significant profits, others may earn more modest amounts or even experience losses. It’s important for sellers to carefully analyze costs, optimize their listings, and continuously adapt their strategies to maximize profitability. No fixed amount can be stated as the average income for Amazon sellers.
So, Is Amazon FBA Worth It In 2023?
Overall, there is no specific answer to the question, “Is Amazon FBA worth it or not.” Whether it is worth using depends on many factors, such as cost, delivery speed, control, time, resources, etc. Therefore, you need to consider and calculate carefully before making a decision.
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