Last updated on June 5th, 2023
Written by Mohamed Aden
Have you been looking for a convenient way to fulfill your orders to your customers? Whether you are a new Amazon marketplace seller or not, you might need help to fulfill your orders, especially if they continue to increase. After all, Amazon has billions of monthly site visitors, many of whom can become your customers.
Fortunately, Amazon has launched the Fulfillment by Amazon (FBA) services that helps streamline your online store operations and fulfill orders for your customers without exerting much work on your part. But while this service has many advantages, there are also disadvantages of Amazon fulfillment that you should be aware of.
This blog post will outline six of the biggest downsides of using Amazon FBA and provide tips on working around them.
Fulfillment by Amazon (FBA) is a program that allows third-party sellers to store their items in Amazon fulfillment centers and let Amazon handle the shipping and customer service. It can be used for all products, including books, electronics, apparel, and home goods. But of course, Amazon prohibits some items from being sold through FBA.
Many sellers find this fulfillment option convenient because Amazon picks, packs, and ships all its products to its customers.
As a result, sellers do not have to worry about packing their orders individually and shipping the items themselves. Sellers can free up their time and allocate it for more significant tasks or aspects of their business.
Also, since Amazon has their own staff of warehouse workers, sellers do not need to hire extra employees to pack their orders.
Furthermore, Amazon stores the items in its spacious fulfillment centers. Thanks to this, FBA sellers can free up storage space in their homes. They also have the option not to rent a storage unit or warehouse space, which saves a lot of money.
Lastly, customers can enjoy Prime shipping services when purchasing from brands using FBA. With fast shipping services, you can attract numerous customers, especially loyal Amazon Prime subscribers, which can help boost your sales.
As mentioned above, Amazon FBA is a great way to grow your business because of its numerous perks for third-party sellers like you. However, before taking the plunge, you must consider its drawbacks first and find ways to overcome them. Below are some of the disadvantages of using this service and tips on how to resolve them.
While inventory tracking may seem like a no-brainer for experienced online sellers, it can be a disadvantage for new Amazon FBA sellers. This is especially true for businesses or owners who are accustomed to physically counting their products to manage their inventory.
Amazon's inventory management system might be overwhelming with its features, and sellers may get confused about how to utilize them properly.
Leverage Seller Central (with Professional Assistance)
Because automated inventory management systems are effective and efficient for running an ecommerce business, you must learn how to utilize the one built-in on Seller Central. You can read articles or watch demonstrations on using available systems.
However, it would be best to seek help from professional account managers who are well-versed in the Seller Central dashboard and its amazing features. This way, you can skip the learning curve and proceed with accomplishing more important tasks in your business.
Once you use FBA to fulfill your orders, expect higher return rates because customers can return their orders directly to Amazon, not to you, even without your approval. In addition, with Amazon's 30-day return window, customers can choose to return the products, and Amazon will take care of the return shipping, especially if it's fulfilled through FBA.
Unfortunately, this situation means additional costs for sellers and higher rates of damaged and lost inventory that they cannot resell anymore. Moreover, FBA sellers cannot modify their return policies and must comply with Amazon's since they must provide the same experience and guarantees to all customers.
Work on Your Listings
Even though returns are inevitable in ecommerce, you must not let them hinder you from scaling your business. So to avoid returns, whether fraudulent or not, you must optimize your product listings by providing accurate sizing guides, detailed descriptions, and clear images and videos.
This way, your customers can clearly visualize the products and get the variation they need.
Collaborate With Professional Visual Artists
Working with professional photographers and videographers will give you high-quality media for your listing. Also, take advantage of copywriting or listing optimization services for the best results.
Remarket Your Products on Other Platforms
Lastly, you can try to resell your returned items on other marketplaces, look for bulk resellers, or send them to liquidation centers. By doing these, you can still get something out of the items returned by your customers.
Most people are familiar with the Amazon logo and associate it with a trusted online shopping experience. When customers see Amazon-fulfilled products, they expect that these items will be shipped quickly and arrive in good condition.
However, many Amazon FBA sellers do not have the opportunity to include their branding on the packaging or promotional materials. This can be a disadvantage for sellers trying to build strong brand identity because customers may not be completely aware of which brand sold the items they bought.
Use Your Logo Creatively
To work around this issue, you can incorporate your brand logo into your products. For example, you can put tags for apparel and accessories or print the logo directly on the items, like for electronic devices and beauty products.
In addition, you can include marketing materials inside the box with your product. Or, you can create product inserts that will direct your customers to your own website or social media pages after making a purchase.
As an Amazon FBA seller, one of the biggest disadvantages you will face is high costs. So, before you start using this service, you must know all associated costs, such as referral fees, storage fees, and fulfillment fees. These are on top of the fees you pay for your selling plan.
Monitor Your Inventory Data and Costs
To avoid spending too much using FBA, you must carefully calculate your costs and ensure you are charging enough for your products to cover them. It's also a great idea to keep a close eye on your inventory levels and only order what you need to minimize your storage costs. Not doing so could eventually lead to sunk costs.
Be Selective With the Products You Sell
Carefully choose which products to sell under FBA. For example, if your products are small or light, they are perfect for Amazon’s fulfillment service. But if you sell heavy furniture or big appliances, it would be best for you to fulfill your customers' orders on your own.
Once your products are stored in an Amazon warehouse, Amazon will be responsible for everything from packing to dealing with customer service. This setup leaves no door for third-party sellers to interact with their customers directly. To an extent, it's beneficial because it takes off the pressure on you to provide excellent customer service and handle any customer issues or returns.
However, it can also be a disadvantage because you have no direct way to build rapport and brand loyalty with your customers, leading to repeat purchases. You cannot even ask for additional feedback besides the reviews they leave on your listing, eliminating your chances to improve your products or services.
Lastly, you will not be able to upsell or cross-sell your products since Amazon handles all transactions on your behalf.
Seek Other Ways of Enhancing Customer Satisfaction
Instead of treating this as a major disadvantage, look at this circumstance positively. Don't stress yourself out with customer issues and product returns. With this in mind, you can focus on more important parts of your business that help improve customer satisfaction.
For example, if you have social media platforms, you can conduct short polls or surveys to know your followers' and customers' preferences. Use these platforms to communicate with them through interactive content and engagement in the comments.
Sales tax can be confusing and time-consuming to manage when using Amazon FBA. Each state has its own rules and tax rates, and it can be hard to decide which one to follow if your store's inventory is warehoused in a different area.
Additionally, some FBA sellers may need to collect and remit sales tax, placing a significant strain on their resources. Having inventory in a third-party warehouse establishes a physical presence, and about half of all states require these sellers to register and file sales tax.
Use a Sales Tax Management Service or Software
Take advantage of resources that can automate your tax duties, such as working with Amazon FBA sales tax experts or using software. These ensure you're compliant while minimizing your administrative burden.
Try Amazon's Tax Collection Service
This service allows the Amazon platform to collect and remit sales tax in your stead. But there's a catch: it's unavailable in some states and for some sellers.
Stay Updated About Sales Tax Laws
Ultimately, you must stay informed about sales tax updates as an Amazon FBA seller. Look up reliable sources of information or work with tax professionals to help you catch up and comply with sales tax laws. Doing so minimizes the risk of penalties and ensures your business stays compliant.
In running an Amazon marketplace business, there is no one-size-fits-all solution, especially in cases like order fulfillment systems. Despite all the benefits that Amazon's fulfillment services can provide, they still come with disadvantages. Sellers (especially beginners) must be aware of these before taking action.
FBA's drawbacks include unfamiliar inventory tracking methods, increased returns, and no control over return policies. Additionally, sellers have to deal with high operation costs, no opportunity for branding, and no direct customer relationship.
However, you can still solve these problems by carefully planning and strategizing your actions, optimizing your product listings, using social media platforms, and hiring reliable account managers.If you need assistance managing your Amazon FBA business, it’s best to work with an individual or agency providing account management services, like Seller Interactive. With our experienced team, we can help you overcome these FBA disadvantages and grow your business to greater heights.
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